The budget deficit for the federal budget has just been revised by the White House by close to $2 trillion over the next 10 years, now estimated to come in at around $9 trillion rather than the $7.1 trillion originally projected. (I wonder how you miss a number by about $2 trillion in the first place?)

As far as for 2009, they’re saying that deficits should drop from original estimates of $1.84 trillion to $1.58 trillion, citing expected costs for bailouts in the financial sector to be lower than expected; but many question that assertion with over four months left in the year, which could raise those numbers significantly.

The lower-than-expected costs were adjusted based upon $250 billion that had been added to the budget to bailout banks but now dropped. These latest figures will be officially announced on Tuesday.

For the longer term upwards adjustment, that changed because the long-term economic outlook is worse than thought earlier in 2009.

The White House has been way off with its economic projections, as in both February and May they asserted the economy would contract by 1.2 percent in 2009, but in the first quarter alone it pulled back by 6.4 percent, its worst performance in 30 years. Again, they are so far off it’s coming to the point of being incompetent.

The Congressional Budget Office used more accurate and reliable data when they said that the budget deficits would probably be $9.1 trillion from 2010-19. But even those were based upon the assumption the economy would contract by 2.2 percent.

Going back to when the White House said they would be able to manage the budget deficit if they were able to keep it at 3 percent of the gross domestic product, that’s not going to happen, with the idea being now it could surpass 4 percent relatively easily. That’s a big problem, and one not being faced publicly by the administration. The original projection of a $7.1 billion deficit just adhered to that standard, so what’s going to be done now that it has went far beyond that?

Will Obama break his promise that he wouldn’t raise taxes on the middle class, when he said he wouldn’t increase the heavy burden already born by those that make under $200,000 a year?

In the midst of all this, Federal Reserve Chairman Ben Bernanke said incredulously with a straight face at the annual central bankers’ symposium that “prospects for a return to growth in the near term appear good.” He really said that.

While Bank of Israel Governor Stanley Fischer didn’t come right out and contradict that, he did say “despite the encouraging signs of recovery, it is too early to declare the economic crisis over.”
 
European Central Bank President Jean-Claude Trichet added that some selective positive signs aren’t enough for him to say at this time that there is any sustainable recovery on the way.