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The United States Federal Budget for Fiscal Year 2010, entitled A New Era of Responsibility: Renewing America's Promise, is a spending request by President Barack Obama to fund government operations for October 2009-September 2010. Figures shown in the spending request do not reflect the actual appropriations for Fiscal Year 2010, which must be authorized by Congress.

Overview

2010 Budget: Projected Deficits and Debt Increases
President Barack Obama proposed his 2010 budget during February 2009. He has indicated that health care, clean energy, education, and infrastructure will be priorities.

The federal deficit is forecast to be $1.75 trillion in 2009, declining to $1.17 trillion in 2010 (the first year of the plan) and $533 billion by 2013.

The annual increase in federal debt due to these deficits will total $2.56 trillion in 2009, declining to $1.14 trillion in 2010 and $520 billion by 2013. However the total annual increase in federal debt will be $2.72 trillion in 2009, declining to $1.37 trillion in 2010 and $925 billion by 2013. The difference between the debt due to federal budget deficits and the total federal debt is made up of debt held in government accounts, mainly the Social Security and Medicare trust funds, which invest their excess receipts in government debt.

Tax increases will be levied on the highest income earning taxpayers, returning the highest marginal tax rate to the Clinton-era level of 39.6%. The levels of funding for Medicare, Medicaid and Social Security has increased by 13% over the 2009 federal budget. The base Department of Defense budget is also increased through 2014 (Table S-7), from $534 to $575 billion, although supplemental appropriations for the Iraq War are expected to be reduced.

Estimates of revenue are based on GDP growth forecasts that exceed the Congressional Budget Office's January forecast (which does not include the effect of the American Recovery and Reinvestment Act of 2009) through 2010 but which are broadly consistent with it from 2011 through 2019. The budget's GDP growth assumptions are more optimistic than the February Blue Chip consensus forecast through 2014 (by an average of 1.2 percentage points) but again are broadly consistent with the Blue Chip from 2015 through 2019.

Estimated receipts for fiscal year 2010.

Total receipts

Estimated receipts for fiscal year 2010 are $2.381 trillion, an increase of 8.9%.

Total spending

A pie chart representing spending by category for the US budget for 2010


The President's budget for 2010 totals $3.55 trillion. Percentages in parentheses indicate percentage change compared to 2009. This budget request is broken down by the following expenditures:
  • Mandatory spending: $2.184 trillion (+15.6%)
    • $695 billion (+4.9%) - Social Security
    • $453 billion (+6.6%) - Medicare
    • $290 billion (+12.0%) - Medicaid
    • $0 billion (-100%) - Troubled Asset Relief Program (TARP)
    • $0 billion (-100%) - Financial stabilization efforts
    • $11 billion (+275%) - Potential disaster costs
    • $571 billion (-15.2%) - Other mandatory programs
    • $164 billion (+18.0%) - Interest on National Debt




Deficit

The total deficit for fiscal year 2009 was $1.42 trillion, a $960 billion increase from the 2008 deficit. The deficit is forecast to decline to $1.17 trillion in 2010 and $533 billion by 2013.

The 2009 deficit includes the cost of the Troubled Asset Relief Program ($154 billion in 2009), the American Recovery and Reinvestment Act of 2009 ($202 billion in 2009, $353 billion in 2010, and $232 billion in 2011 forward), and the 2009 Omnibus spending bill ($410 billion)--and changes due to President Obama's policy proposals.

The 2009 budget deficit would represent 12.3% of gross domestic product, the largest share since World War II.

Debt increases

2010 Budget: Total Debt $ and % to GDP
The 2010 Budget proposed by President Barack Obama projects significant debt increases. The debt is projected to nearly double to $20 trillion by 2015, but is expected to increase to nearly 100% of GDP by 2010 and remain at that level thereafter. These estimates assume real GDP growth (after inflation) ranging from 2.6% to 4.6% annually from 2010 through 2019, which exceeds Blue Chip consensus estimates.

The high level of debt and continuing large trade deficits have raised concerns regarding inflation and the value of the dollar relative to other currencies, as well as its place as the primary reserve currency. The Economist wrote in May 2009: "Having spent a fortune bailing out their banks, Western governments will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors. Given the political implications of such austerity, the temptation will be to default by stealth, by letting their currencies depreciate. Investors are increasingly alive to this danger..."

The Center on Budget and Policy Priorities reported in August 2009 that President Obama's proposals would actually reduce future deficits relative to just continuing the policies of the prior administration.

Causes of Change in CBO Forecasts

Causes for Changes in CBO Forecasts
The U.S. budget situation has deteriorated significantly since 2001, when the Congressional Budget Office (CBO) forecast average annual surpluses of approximately $850 billion from 2009-2012. The average deficit forecast in each of those years is now approximately $1,215 billion. The NY Times analyzed this roughly $2 trillion "swing," separating the causes into four major categories along with their share:
  • Recessions or the business cycle (37%);
  • Policies enacted by President Bush (33%);
  • Policies enacted by President Bush and supported or extended by President Obama (20%); and
  • New policies from President Obama (10%).


CBO data is based only on current law, so policy proposals that have yet to be made law are not included in their analysis. The article concluded that President Obama's decisions accounted for only a "sliver" of the deterioration, but that he "...does not have a realistic plan for reducing the deficit..."

Renewable energy

The budget proposes to support renewable energy development with a 10-year investment of US $15 billion per year, generated from the sale of greenhouse gas (GHG) emissions credits. Under the proposed cap-and-trade program, all GHG emissions credits would be auctioned off, generating an estimated $78.7 billion in additional revenue in FY 2012, steadily increasing to $83 billion by FY 2019.

External links



References




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