Deeper recession bumps up deficit estimate

WASHINGTON, Aug. 25 (UPI) -- A deeper-than-expected economic downtown has prompted the U.S. government to raise its 10-year deficit estimate to $9 trillion, officials said.

The Obama administration Monday raised the estimate from $7.1 trillion, but Peter Orszag, director of the Office of Management and Budget, told The New York Times the new estimate only reinforces the need to overhaul the U.S. healthcare system to get a handle on medical costs.

"A lot of people will look at this deficit and say we cannot afford healthcare reform," Orszag told the newspaper, but, he added, the opposite is true.

"The size of the fiscal gap is precisely why we must enact fiscally well designed healthcare reform now," he said.

The Times reported the $9 trillion estimate includes the cost of the healthcare reforms and $600 billion in new revenues not yet approved by Congress.

The main reason for the hiked estimate is the recession is deeper than first thought. Washington originally assumed the economy would shrink 1.2 percent. Instead, it is set to shrink nearly 2 percent while unemployment is expected to average 9.3 percent this year and 9.8 percent next year, the Times said.