Deficit projection 'stuns' Congress

Without policy changes, ongoing deficits will add $1.1 trillion to the national debt every year, he adds. “This is simply a stunning increase in our deficits and debt.”

“While we have to do short-term things to lift the economy, we have to guard against things that will make our long-term situation worse,” he added, at a budget panel hearing on the CBO report on Thursday. Meeting with economists in a daylong session on Wednesday, Senate Republicans began to develop a strategy for assessing the value of new stimulus spending in the face of new deficit estimates.

“To justify any investment from the public sector, you need to demonstrate that the return on that investment will exceed the return if you left the money in the private sector,” said Sen. Jon Kyl (R) of Arizona, the Senate Republican whip, after the meeting.

Republicans want to make sure that the economic recovery plan not include policy elements that increase spending permanently or be loaded up with member pork projects, or earmarks, in the guise of stimulus.

“The spending should not create a political dynamic that makes it hard to stop,” said Harvard economist Martin Feldstein, who met separately with House Democrats and Senate Republicans on Wednesday.

As a fiscal conservative, Mr. Feldstein told the House Democratic forum that he disliked budget deficits and government spending, because they confer burdens on future generations and weaken the economy, but that “it is important to have that fiscal stimulus at this time and to design the tax cuts and the spending changes in the most cost-effective way.”

Overall, Republicans favor tax cuts over new spending as a strategy for economic recovery. They cite the new CBO deficit estimates as Exhibit A for limiting new government spending in the form of stimulus.

“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 dollars,” said House Republican leader John Boehner (R) of Ohio, in a statement

“The reality is that the decisions we make today will impact future generations, and burying our children and grandchildren under a mountain of debt to pay for more wasteful government spending would be the height of irresponsibility,” Representative Boehner said.

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