May 11 (Reuters) - The Obama administration revised its estimate of U.S. budget deficits, adding $176 billion to the already huge federal government shortfall for this year and next.
The higher short-term deficits will add to already record funding gaps that stem from the economic recession and vast expansion in government spending that is aimed at rescuing troubled companies and stimulating the economy.
Here are some possible ramifications of the larger deficits in fiscal 2009 and 2010 now being forecast by the White House:
* Republicans are likely to pounce on the new data, saying it underscores Democratic President Barack Obama’s failure -- even this early into his presidency -- to tackle fiscal problems that began in the Republican Bush administration.
But with a fiscal 2010 budget already passed by the Democratic-led Congress, the outline for overall government spending next year has already been put into place.
* The U.S. debt, now at $11.27 trillion, will swell more rapidly if the Obama administration’s projections prove accurate. Higher government debt can lead to higher borrowing costs for consumers -- from mortgages on houses to credit card costs. Much of the U.S. debt is now being financed by China, Japan and other foreign countries and interest costs on the debt are costing U.S. taxpayers hundreds of billions of dollars a year.
* While the White House is now forecasting a $1.84 trillion deficit this year, up by $89 billion from a previous estimate, total projected deficits over the next 10 years are seen almost staying the same -- rising to $7.1 trillion in 2010-2019, instead of just under $7 trillion for that period.
Such long-term estimates can prove wrong if economic conditions change significantly for the better or worse.
* Democrats in the White House and Congress might cite the larger deficits as further proof that quick action has to be taken to reform healthcare in the United States, a top priority of the administration. Obama has argued that such reforms would lower the government’s costs in the Medicare and Medicaid healthcare programs for the elderly and poor. These rising costs are accounting for more and more of the budget deficit.
* The new budget figures could also deliver one more wake-up call to politicians who have been avoiding other reforms to bring down the costs of the Social Security retirement system as well as Medicare and Medicaid. Benefits in these three programs are expected to skyrocket in coming years as the U.S. population ages.
Reporting by Richard Cowan; Editing by Eric Beech
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