The White House today said US unemployment would be higher and the budget deficit larger than previously thought, which could slow president Barack Obama's drive to push his domestic policy plans through a skeptical Congress.
The White House deficit projections now lie closer to those of the independent Congressional Budget Office, but these will also be updated today and may paint a grimmer picture.
The administration's mid-session budget review also predicted a return to positive US growth by end-2009, as the worst recession since the Great Depression ends, and lifted the pace of economic activity that it expects between 2011-2016.
Mr Obama's central policy priority of overhauling the US healthcare system has already run into trouble caused by an angry backlash from critics who complain its $1 trillion pricetag is too high and who worry it will limit choice.
And while public opinion poll numbers also show a decline in support for Mr Obama's overall healthcare drive, the White House said the new figures showed just now important it was to get a grip on the nation's rocketing healthcare expenses.
The White House budget report was overshadowed by Mr Obama's move to name Federal Reserve chairman Ben Bernanke to a second term, seeking to keep him in place to steer the world's largest economy out of its downturn.
The White House confirmed the budget deficit would be a smaller than initially thought $1.58 trillion in fiscal 2009, due mainly to $250 billion earmarked for bank bailouts being dropped.
In addition, the deficit between 2010 and 2019 is expected to total about $9 trillion, or $2 trillion more than forecast when the White House updated its initial budget projections in May. These numbers were leaked last week.
As a percentage of GDP, the budget deficit will touch 11.2 per cent in fiscal 2009, edge down to 10.4 per cent in 2010 and then fall fairly smartly and hover around 4 percent out to 2019.
The mid-session budget review forecast the economy would shrink by 2.8 per cent year-over-year in 2009, but grow 2 percent in 2010 and by 3.8 per cent in 2011.
The projection for unemployment has been raised substantially since May, to 9.3 per cent on average in 2009 and 9.8 per cent in 2010, and it is espected to peak at 10 per cent in the final three months of this year.
As a result of the larger deficit, the ratio of national debt to gross domestic product will likely rise from 48 per cent in 2009 to 57 per cent in 2010 and almost 69 per cent by 2019.
Reuters