CBO projects deficits as high as $11.5 trillion over decade

CBO projected on Tuesday that the budget deficit would be about $1.4 trillion in fiscal 2009 and $8.7 trillion in 10 years if the recently enacted $787 billion stimulus is taken into account and several other policies are assumed -- policies similar to those expected in President Obama's fiscal 2010 budget outline due out on Thursday.

At the request of House Speaker Nancy Pelosi, D-Calif., and House Budget Committee Chairman John Spratt, D-S.C., the CBO report looked at three scenarios and projected what the nation's books would look like.

Under current assumptions, CBO projects a deficit of $1.2 trillion for fiscal 2009 and a cumulative deficit of $3.1 trillion between fiscal 2010 and fiscal 2019.

For the first scenario, CBO estimates the deficit would be $1.4 billion in 2009 and total $11.5 trillion through fiscal 2019.

Along with incorporating the stimulus, CBO's first scenario assumes that the 2001 and 2003 tax cuts are extended; that the alternative minimum tax will be indexed for inflation after 2009; emergency spending would total about $1 trillion in fiscal 2009 and will remain at that level, adjusted for inflation thereafter; that Congress in fiscal 2009 will provide $186 billion in total appropriations for operations in Iraq and Afghanistan and for other activities related to the wars and in each year for 10 years, but adjusted for inflation; and the fees paid to physicians under Medicare would increase by 1 percent a year.

The second scenario assumes the same as the first except that the number of troops deployed to Iraq, Afghanistan, and elsewhere declines gradually over a four-year period, from about 190,000 in fiscal 2009 to about 75,000 in fiscal 2013.

Under this second scenario, CBO estimates the deficit would be $1.4 trillion in fiscal 2009 and total $10.1 trillion over the next decade.

For the third scenario, CBO made the same assumptions as those for the second scenario, except they assumed that the 2001 tax cuts for upper-income taxpayers expire as scheduled and the parameters for estate and gift taxes are maintained at their 2009 levels.

Under this third set of policy alternatives, the deficit would be $1.4 billion in fiscal 2009 and $8.7 trillion over the time frame through fiscal 2019.