WASHINGTON (CN) – As lawmakers rush to raise the debt ceiling and the Obama administration tries to tighten its belt, the Congressional Budget Office predicted Tuesday that the 2010 fiscal year would bring a towering $1.35 trillion deficit, which is slightly lower than last year. An expected decade of deficits will take the national debt from just over $12 trillion now to more than $21 trillion by 2020, said the budget office report.
While the independent budget office lauded the stimulus package and other government recovery efforts – which Republicans have decried as expensive and useless – for moderating the severity and length of the recession, it continued to predict a slow economic recovery.
The expected 2010 deficit is slightly smaller than the $1.4 trillion of the 2009 fiscal year, which ended in September, but it still constitutes a hefty 9 percent chunk of the 2010 gross domestic product.
2009 saw the largest proportion of deficit to economic output since World War II, at nearly 10 percent.
The budget office report comes a day after the Obama administration – which must balance the needs of a persistently weak economy with the growing debt – announced a three-year freeze on funding for many domestic programs amid growing anxiety over the deficit.
The freeze is expected to cut $250 billion from the deficit over the next decade. After that, spending on the programs would only increase to match inflation.
The savings would only amount to less than 3 percent of the expected $9 trillion in deficits expected to build up over that time, with a large portion of the deficit growing from Medicaid and Medicare.
Veterans programs, foreign aid and the war budget would be spared.
Lawmakers are still debating a measure that would hoist the debt ceiling by nearly $2 trillion to $14.3 trillion.
Senators rejected legislation Tuesday that would have formed a bipartisan commission to tackle the debt. While the majority supported the amendment in the 53 to 46 vote, it required 60 votes to pass. Republicans had expressed concerns that the commission would suggest tax increases and Democrats appeared to fear cuts in Medicare and Medicaid.
Obama is nonetheless expected to flex his executive power to create the task force.
As part of that debt ceiling legislation, senators voted down an amendment last week to use unspent funds from the government’s $700 billion Troubled Asset Relief Program to pay down the federal deficit, despite a majority in favor, as seen with the 53 to 40 vote.
Thirteen Democrats joined 30 Republicans to vote for the amendment, including the amendment’s author, South Dakota Republican Senator John Thune.
CBO Director Douglas Elmendorf is scheduled to testify before the House and Senate budget committees on Wednesday.