Deficit to grow, White House says

In May, the White House predicted the economy would shrink by 1.2 percent this year, but the economy shrank 6.4 percent in the first quarter, the worst in nearly three decades.

Ten-year forecasts are volatile figures subject to change over time. But the higher number will likely create political difficulties for President Obama in Congress as he tries to overhaul health care and energy policy, and could create anxiety with foreign buyers of US debt.

Economists predict a slow recovery from the recession, further testing Obama’s goal of cutting the deficit to $512 billion in 2013. Now, the deficits could easily exceed 4 percent of the gross domestic product, even after cost-cutting efforts or new revenues claimed in Obama’s budget.

Such deficits have always prompted Congress and the White House to take politically painful steps to curb them, such as former president Bill Clinton’s tax-heavy 1993 deficit reduction plan. Obama could be forced to make deep spending cuts or to increase revenues, perhaps jeopardizing his promise to not raise taxes on individuals making less than $200,000 a year.