The latest figures throw a major monkey wrench into efforts to enact Obama's budget, which promises universal healthcare, and higher spending for domestic programs such as education and renewable energy.
The dismal deficit figures, if they prove to be accurate, inevitably raise the prospect that Obama and his allies controlling Congress would have to consider raising taxes after the recession ends or else pare back his agenda.
White House budget chief Peter Orszag said that CBO's economic projections are more pessimistic than those of the White House, private economists, and the Federal Reserve, and that he remained confident that Obama's budget, if enacted, would produce smaller deficits.
Even so, Orszag acknowledged that if the CBO projections prove accurate, Obama's budget would produce deficits that could not be sustained.
"Deficits in the, let's say, 5 percent of GDP range would lead to rising debt-to-GDP ratios that would ultimately not be sustainable," Orszag told reporters.
Deficits so big put upward pressure on interest rates as the government offers more attractive rates to attract borrowers. "It will lead to higher interest rates to the point where it will force policymakers to make changes," said economist Mark Zandi, chief economist at moodyseconomy.com.
Republicans immediately seized on the numbers. They say Obama's budget plan taxes, spends, and borrows too much, and they have been sharply critical of his $787 billion economic stimulus measure and a just-passed $410 billion spending bill that gave big increases to domestic agency budgets.
"This report should serve as the wake-up call this administration needs," said House GOP leader John Boehner of Ohio. "We simply cannot continue to mortgage our children and grandchildren's future to pay for bigger and more costly government."
But Obama insisted yesterday that his agenda is still on track. "What we will not cut are investments that will lead to real growth and prosperity over the long term," he said.
