From the CBO blog

Today CBO issued its annual summer update of the budget and economic outlook. CBO estimates that the federal budget deficit for 2009 will total $1.6 trillion, which, at 11.2 percent of gross domestic product (GDP), will be the highest since World War II. That deficit figure results from a combination of weak revenues and elevated spending associated with the economic downturn and financial turmoil. The deficit has been boosted by various federal policies implemented in response, including the stimulus legislation and aid for the financial, housing, and automotive sectors.

CBO estimates that, as the economy recovers, if current laws and policies remained in place, the deficit would shrink but remain above $500 billion per year, or more than 3 percent of GDP, throughout the 2010–2019 period. As a result, debt held by the public would continue to grow as a percentage of GDP during that time. That debt, which was as low as 33 percent of GDP in 2001, would reach an estimated 54 percent of GDP this year and grow to 68 percent of GDP by 2019.

and we have some assumptions listed.

Specifically, CBO estimates positive economic growth during the second half of calendar year 2009, at an annual rate of 1.6 percent, following declines at an annual rate of 6.4 percent in the first quarter and 1.0 percent in the second quarter.

In CBO’s forecast, real GDP grows by 2.8 percent between the fourth quarter of 2009 and the fourth quarter of 2010, by 3.8 percent in 2011, and by an average of 4.5 percent in 2012 and 2013.

With the economy functioning well below its potential level, inflation is projected to remain very low; the consumer price index for all urban consumers, with food and energy prices excluded, is expected to increase by 1.6 percent this year, by 1.1 percent in 2010, and by 1.0 percent in 2011 (as measured by the change in the index from the fourth quarter of one year to the fourth quarter of the next year).

So, what happens if Q4 GDP 2009 is not positive? As we can see the CBO assumes 2010 GDP 2.8%, 2011 GDP is 3.8% and believes we're booming along by 2012. CBO is also assuming, way on down the road we won't have inflation.

Seems pretty rosy to me and still the deficit numbers are ballooning. I wish the CBO would break things down into best case, average case and worse case instead.

Then we have some Unemployment comments from the White House, which predicts greater than 10% unemployment numbers for some months at the end of 2009, beginning of 2010.

Romer also said the administration predicts the unemployment numbers will peak in the fourth quarter of 2009 and first quarter of 2010 and will hit 10 percent “for some months or some quarters” in that time period. She said the annual average of the unemployment rate for 2009 will be 9.3 percent and 9.8 percent in 2010.

Romer added that these unemployment figures reflect two things: the deterioration of the GDP forecast (“the recession was simply worse” than they thought) and the fact that this is an “unusual recession for labor market.”

Gets worse, the Office of Management and Budget is now projecting a $9.05 trillion deficit over the next ten years.

As a result of a deeper-than-expected recession, certain spending programs (such as unemployment insurance and food stamps) are projected to automatically increase and revenues are projected to automatically decline, compared to our previous projection. Although these effects help to ameliorate the economic downturn by stimulating demand, they also lead to higher medium-term deficits both directly and indirectly (through higher interest costs on a higher level of public debt). Over the next 10 years, the net impact is to add $2 trillion to the projected deficit, compared to our last projection made based on February’s economic assumptions. That brings the projected 10-year deficit for 2010-2019 to $9.05 trillion – in line with CBO’s June projection.