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U.S. spending obligations surge

Recent bills – for students, GIs, housing market – add to long-term budget commitments.

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One reason for the surge in red ink is the joint decision by Congress and the Bush administration in February to pass an economic package, including stimulus checks for most American families. If that plan had not been passed, the projected deficit for the current fiscal year would be $117 billion lower than the estimated $389 billion, Nussle said. Congress and Mr. Bush agreed that "getting the economy back on track was a higher priority than immediate deficit reduction," he added.

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But these record-high estimates don't capture some new programs Congress has approved recently, such as the housing bill, or a rollback of cuts in entitlement programs, such as last month's mandated cuts to doctors treating Medicare patients. Defying a presidential veto, Congress put off a 10.6 percent cut in payments to doctors in the Medicare program, which had been slated to take effect July 1. The cuts were intended to ensure that Medicare costs could be sustained in the long term.

Before leaving for August break, Congress also passed a rewrite of the Higher Education Act that increases the maximum Pell grant for low-income students to $8,000 a year by 2014, up from $4,800, and extends the grants to part-time students. College costs have tripled in the past 20 years, and lawmakers said they wanted to help families catch up.

Critics say the bill, at $169 billion over the next five years, is a budget buster that didn't get enough scrutiny in an election year. On Sept. 18, the House Financial Services Committee will open a hearing on whether government must do more to ensure that lenders have the capacity they need to make loans to students.

The law also bans the US Department of Education from imposing mandates on colleges and universities, including testing to measure student progress along the lines of the No Child Left Behind Act.

It's hard to put a price tag on recent US support for the housing market. If the market recovers, the cost to taxpayers would be zero, according to a Congressional Budget Office estimate of the housing-rescue law. But if the market worsens, this new commitment could cost taxpayers at least $25 billion before the authority expires in December 2009.

On July 14, the Bush administration authorized the Treasury to purchase obligations and securities of government-sponsored enterprises that deal with housing (Fannie Mae and Freddie Mac, and the federal home loan bank) – a potential commitment that's even tougher to estimate.

"Congress didn't get into this by choice," says Sen. Christopher Dodd (D) of Connecticut, who chairs the Senate Banking, Housing, and Urban Affairs Committee. "The Bush administration failed in its oversight."