By Sam Youngman - 08/21/09 05:25 PM EDT
The White House next week will revise the 10-year budget deficit from $7.1 trillion to $9 trillion.
Officials at the White House Office of Management and Budget (OMB) confirmed the enormous debt revision late Friday afternoon, hours after President Obama left for a 10-day vacation.
Unemployment is widely expected to rise this fall, and some economic experts believe the rate will not fall until next summer.
Meanwhile, the mortgage crisis continues to hit home owners in their pocketbooks. This week the Mortgage Bankers Association reported that foreclosures would not fall until the end of 2010.
“The new forecasts are based on new data that reflect how severe the economic downturn was in the late fall of last year and the winter of this year,” an official told Reuters.
The new projections bring the White House numbers in line with estimates by the independent and non-partisan Congressional Budget Office (CBO). In June, CBO projected a 9.1 trillion deficit.
Federal Reserve Chairman Ben Bernanke on Friday said prospects for growth appear good, but that the recovery will take a long time.
The increased deficit projections come after efforts by the Bush and Obama administrations to bail out the financial system and stimulate the broader economy.
The Bush administration committed hundreds of billions of dollars to prop up Fannie Mae and Freddie Mac, the two housing giants. In October, as the financial crisis deepened, Congress passed the $700 billion financial rescue package. In February, Obama signed a $787 billion fiscal stimulus package with the effort to save or create 3.5 million jobs.
While those efforts have led to greater deficits, the broader effects of the recession -- which began in December 2007 -- are also taking their toll. Decreased tax revenue and lower corporate profits are also contributing to higher deficits.
The deficit projections will likely spark questions about the Obama administration's efforts to bring down long-term deficits, a key cause for concern in the contentious debate over healthcare reform.
Republicans have criticized Obama and congressional Democrats since early this year for pursuing policies that have caused wider deficit projections. Conservative and centrist Democrats are also wary of efforts that commit additional money without bringing down the national debt.
Meanwhile, foreign countries, particularly China, have raised questions about the deficit projections and the ability of the United States to continue to finance its debt.
Next week’s report is also expected to show that the deficit for the year is roughly $200 billion less than expected. But this is because the administration no longer expects to need money it had set aside as a reserve in case banks needed further help this year.
This story was updated at 6:16 p.m.
Silla Brush contributed to this article.