Huge deficit puts Obama on the ropes

With the government already $1.2 trillion in the hole, winning support for stimulus gets tougher

WASHINGTON -- The forecast Wednesday of a jaw-dropping $1.2 trillion one-year federal budget deficit will make it harder for President-elect Barack Obama to win broad support for a massive stimulus package that would add even more to the red ink.

With his party controlling both the House of Representatives and the Senate, Obama is still likely to get the OK for spending and tax cuts that would cost $1 trillion or more over two years and are designed to jump-start the economy and create or save 3 million jobs.

However, while many economists, business groups and politicians agree on the need for something dramatic, Obama now concedes that he'll have to wait until February to get a bill to sign. He'll probably find conservative "blue dog" Democrats as well as Republicans balking at the idea of borrowing another $1 trillion on top of this new annual deficit for the 2009 budget year.

They could deny Obama the kind of broad, bipartisan approval that he hopes will signal not only that he's changed the political culture of a divided Washington but also that he's put forward a plan that's widely popular. Such approval is crucial as he moves to rebuild trust in the government and the economy.

He plans to speak more about the need to rebuild confidence in a speech on the economy today.

Yet even before he can point to a law meant to boost the economy or to post-stimulus efforts to rein in budget deficits, he has to deal with the fallout of the Congressional Budget Office's forecast that the current year's deficit will jump from last year's $455 billion to a record $1.2 trillion.

"There's a sticker shock problem," said Steven Schier, a political scientist at Carleton College in Minnesota and the author of a book on budget politics. "This is a new problem for Obama: How far out there are people willing to go?"

He noted that there are as many as 100 fiscally conservative Democrats in the House and 20 in the Senate who may be stung by the deficit figure and reluctant to use the stimulus as an easy ride for new programs.

"We want to do an economic stimulus, but there also has to be fiscal discipline," said Sen. Mark Pryor, D-Ark. "I do like doing things in the stimulus that invest. I like the commitment to infrastructure. ... I like the idea of helping colleges and universities.

"But I'm always leery when people start thinking too much of politics and not [economics]."

Republicans are a tougher sell, even with Obama's promise to add tax cuts to the stimulus package.

"The deficit estimate makes it clearer than ever that we cannot borrow and spend our way back to prosperity when we're already running an annual deficit of more than $1 trillion," said Rep. John Boehner, R-Ohio, the House Republican leader.

Boehner released statements from several economists questioning the value of deficit spending to prime the economy.

The U.S. Chamber of Commerce, one of the country's most prominent business groups, supports the general goal of a stimulus package that would cost as much as $700 billion and include a mix of 60 percent federal spending and 40 percent tax cuts.

However, chamber President Thomas J. Donahue warned Wednesday that Obama would need stringent controls to ensure that the temporary spending doesn't become permanent. "We've got to be very, very careful that we don't make a larger government," he said.