Deficit of $1.4 Trillion Limits Democrats

By JOHN D. MCKINNON WASHINGTON -- The Treasury said the U.S. ran its biggest budget deficit since World War II, a record that promises to complicate Democrats' efforts to enact their agenda. The Treasury Department reported that the deficit for the 2009 fiscal year ended Sept. 30 came in at about $1.4 trillion, or about 10% of the U.S.'s gross domestic product. From health care to economic recovery to the Afghanistan war, the government's gloomy fiscal condition is constraining Democrats. Deficits also are looming large as a political issue in the 2010 campaign, as voters fret about the long-term consequences of mounting debt. "I don't think I've seen this level of concern since 1992, when Ross Perot said we need to look under the hood and fix the engine," House Majority Leader Steny Hoyer of Maryland said in an interview Friday. "Government, individuals and businesses are all looking at their debt loads and recalculating." The Treasury said government receipts were down 16.6% in 2009, to $2.1 trillion, a result of the recession and stimulus tax breaks. Outlays rose more than 18% to $3.5 trillion, including $113 billion of stimulus outlays. Democrats such as Mr. Hoyer blame the deficit largely on the Bush administration, which inherited budget surpluses, but left office with deficits. But now Democrats find themselves on the defensive over deficits, partly as a result of the $787 billion stimulus they pushed through last winter. On Friday, administration officials defended the stimulus as necessary to pull the economy back from the brink. They also cheered what they called the effects of economic stabilization and recovery, such as lower bailout costs and improving tax receipts, that helped reduce the huge 2009 deficit by 24% from earlier projections. Still, future projections remain higher than many economists believe are sustainable. White House budget director Peter Orszag said in a written statement Friday the administration already is considering proposals for next year's budget "to put our country back on firm fiscal footing." The biggest pressure point so far has been on the health-care overhaul, where President Barack Obama is insisting government costs be limited to $900 billion and fully offset with tax increases or spending cuts. Some freshman Democrats are pushing their party to go further and use the bill to substantially reduce future government spending. Rep. Steve Driehaus, an Ohio freshman, said he brought up deficit concerns as recently as Thursday in an informal meeting at the White House with Chief of Staff Rahm Emanuel. As job losses mount, there's pressure on the party to pass tax and spending measures to accelerate the economic recovery. But Democrats appear reluctant to sign on to big new stimulus measures. Some House leaders also have been less than enthusiastic about Mr. Obama's proposed $250 payments to seniors. Deficits are having an effect, too, on Democrats' thinking on the Afghanistan war. In a bluntly worded statement last week, House Appropriations Committee Chairman David Obey of Wisconsin estimated a big ramp-up ultimately would cost almost $1 trillion. Such a commitment "would devour virtually any other priorities that the president or anyone in Congress had," he wrote. Republicans are making hay with the deficit issue. "This is the No. 1 issue that I talk about," said Frank Guinta, mayor of Manchester, N.H., who's challenging Democratic Rep. Carol Shea-Porter. Write to John D. McKinnon at john.mckinnon@wsj.com