The next US president will inherit a mountain of debt from the latest government bailouts, making it difficult to implement new programs promised during the campaign, analysts say.
The government closed its books on the 2008 fiscal year September 30 with a record deficit of 455 billion dollars, and many private analysts say the current fiscal year in which Barack Obama or John McCain will be elected will end with a gap of one trillion dollars.
"The budget deficit is easily going to double and there is not going to be the kind of room to accommodate all the promises the candidates have made," said Maya MacGuineas, head of the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group.
The campaign pledges of the two candidates could make these deficits even bigger, according to MacGuineas and other budget analysts.
A report by the committee suggested tax cuts promised McCain could add 414 billion to 482 billion dollars to the deficit and Obama's tax plans could cost some 360 billion. These would only partly be offset by savings from other areas, according to the analysis.
"I don't think either one of them has been realistic about the budget," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group dedicated to a balanced budget.
"It's unavoidable that we're going to have budget deficits. The important thing is that we not lose track of fiscal discipline."
Bixby said one of the lessons of the global credit crisis "is that it's dangerous to rely on too much debt."
Bixby said that with the national debt now above 10 trillion dollars, the fiscal problems are on shaky ground since obligations are rising for retirement costs of the vast baby boom generation.
"I would rather have the candidates break their campaign promises than go ahead with an unaffordable policy," he said.
"People are not stupid. I think most people are discounting some of the campaign promises and recognize we are in a crisis."
MacGuineas said the risks of too much debt will be that investors and central banks may balk at buying US Treasury obligations, forcing interest rates up. This would vastly increase costs for the government as well as other types of loans.
"We are going from one bubble to the next," she said. "We are bailing ourselves out by borrowing more money. If that bubble implodes, it would be even worse than the situation we have now."
Obama is pledging to to cut taxes for 95 percent of US wage earners while hiking income taxes for families making more than 250,000 dollars a year. McCain would keep the tax cuts from the George W. Bush era rather than let them expire in 2011 while offering new family and corporate tax deductions.
McCain has pledged to balance the budget, promising a freeze in most spending programs, but analysts are skeptical this will be enough to erase the deficit.
Obama has indicated he would accept pay-as-you-go budget rules that would require Congress to offset any new spending by increasing taxes or cutting other programs, although it appears hard to fund his health care, infrastructure and other projects.
Neither candidate wants to acknowledge it, but budget hawks say Washington will have to find ways to raise taxes despite the unpopularity of such measures and a wide belief that low taxes are positive for economic growth.
"If taxes fall too far below spending for too long, the resulting deficits will eventually cancel out whatever positive economic effect there may be from low taxes," said a policy brief from the Concord Coalition.
"In the final analysis, revenues must be sufficient to pay for the cost of government. Debt is not a painless alternative to taxation."
"Deficit reduction is about pain," says Brian Riedl, analyst at the Heritage Foundation, a conservative think tank in Washington. "Those running for office really don't want to discuss those things."
Source: Agencies
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