As economy bites, White House delays budget review

As unemployment rises and economic forecasts sour, the White House has delayed until August the release of its mid-year budget review, which may include a record-shattering deficit projection.

The review, a regular update of the executive branch's outlook for the U.S. fiscal picture, is normally published in July, but officials said it had been rescheduled because of delays typical in years when a new president has taken office.

Republicans accused President Barack Obama's Democratic administration, which is urging Congress to pass a costly overhaul of the U.S. healthcare system, of sidelining bad news on budget deficits until after lawmakers leave Washington for their August recess.

Let's be honest about what this is: an attempt to hide a record-breaking deficit as Democratic leaders break arms to rush through a government takeover of health care, said John Boehner of Ohio, the top Republican in the House of Representatives.

By burying this budget update until after Congress leaves town next month, the administration is not willing to own up to the consequences of this dangerous fiscal agenda, he said.

The White House Office of Management and Budget called the delay normal for the first year of a new presidential term.

Because of the unique circumstances of a transition year, we are -- like President George W. Bush in 2001 -- releasing the Mid-Session Review a few weeks later than as is usual in non-transition years, OMB spokesman Kenneth Baer said.

GETTING WORSE

In May, the White House pushed up its budget deficit estimates for 2009 to $1.84 trillion -- representing a massive 12.9 percent of gross domestic product.

A White House forecast released in February projected a deficit of $1.75 trillion, or 12.3 percent of GDP, for the 2009 fiscal year, which ends September 30.

A worsening economic picture since those initial projections will shape the latest review.

Unemployment hit a 26-year high of 9.5 percent in June and is likely to keep rising, probably topping the psychologically significant 10 percent level.

The Federal Reserve expects unemployment will fall modestly in 2010, even though it expects economic growth to resume. In the updated forecasts it released last week, the Fed estimated that 2010 unemployment will be in the 9.5 percent to 9.8 percent range, gloomier than its April estimate of 9 percent to 9.5 percent.

The jobless rate takes a toll on the government's coffers, with higher outlays going toward unemployment benefits and lower revenues coming in from out-of-work citizens.

Soaring budget deficits have made it harder for Obama to sell his domestic agenda, but the president argues healthcare reform is critical now -- despite its cost -- to strengthen the U.S. economy in the future.