The Congressional Budget Office (CBO) said that this year’s budget deficit is now going to be nearly $1.7 trillion, which is  much more than the $400 billion gap than it had forecasted about two months ago. Next year’s deficit is supposed to be nearly $1.1 trillion, which is $430 billion more than its previous forecast. And all this without taking into account President Obama’s budget plans to cut taxes and increase spending. The increases are supposed to be mainly due to the increase in spending which the fiscal stimulus package is delivering and the increased cost of saving the financial system from going down under.

Although the deepening recession is partly to blame for the increase, the nonpartisan CBO says the increases are largely due to the sharp rise in spending (think fiscal stimulus package) and the higher cost of saving the financial system.

Political firestorm

The report immediately generated a firestorm of comment in Washington. Republicans said the new numbers ““should serve as a wake-up call” to the administration.” The President’s press secretary, Robert Gibbs, countered that the new numbers would not affect the administration’s effort to cut the budget deficit in half by the end of his first term.

However, some independent budget experts say the sharply rising deficit will change the political context for Mr. Obama’s agenda.