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updated 4/12/2011 3:55:21 PM ET 2011-04-12T19:55:21

The $38 billion in spending cuts agreed to last week won't prevent this year's budget deficit from setting another record high, estimated at $1.5 trillion.

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Most of the agreed-to spending cuts either affect future budgets or amount to accounting gimmicks that won't reduce actual spending.

Story: Budget tricks helped Obama save programs from cuts

The Treasury Department reported Tuesday that the deficit already totals $829.4 billion through the first six months of the budget year — a figure that until 2009 would have been the biggest ever for an entire year. For March alone, the government ran a deficit of $188 billion.

President Barack Obama and congressional Republicans averted a government shutdown last week by agreeing to the largest-ever spending cuts for a single year. But David Wyss, chief economist at Standard & Poor's in New York, said those cuts amount to a "rounding error" in this year's deficit.

The cuts include unspent money from the 2010 census, which is completed, and $2.5 billion from the most recent repeal of highway programs that can't be spent because of restrictions set by other legislation. They also include $3.5 billion in unused bonuses for states that enroll more children in a health care program for lower-income families.

Wyss expects the deficit will surpass the record of $1.41 trillion hit in 2009. The nonpartisan Congressional Budget Office raised its estimate earlier this year from $1.1 trillion to $1.5 trillion. A tax-cut package negotiated in December by Obama and Republicans, which includes a one-year reduction in the Social Security payroll tax, prompted the CBO to raise its estimate.

The ballooning deficit is certain to give Republicans leverage in future spending debates, starting with the upcoming vote to raise the government's borrowing authority above $14.3 trillion.

The Treasury has told Congress that it must vote to raise the debt limit by summer. Without an increase, the government would not be able to meet its current debt payments, resulting in an unprecedented default on its debt.

Leverage for Republicans
Republicans hope to use vote on the debt limit to force Obama to accept long-term deficit-reduction measures. A big fight looms over the 2012 budget, which will center on House Republicans' plan to cut $5.8 trillion over 10 years by making sweeping changes to Medicare and Medicaid.

Obama is scheduled to deliver a speech Wednesday in which he will outline his own goals to achieve long-term deficit reductions.

Story: Obama poised to enter long-term budget fight

Some analysts see the House spending plan, put forward by House Budget Chairman Paul Ryan, R-Wis., and Obama's speech as the opening salvos in a battle that will likely extend through the 2012 presidential campaign. There is little expectation that major changes in the government's entitlement programs will occur until after the upcoming election.

However, both parties will likely stake out their ground and seek to convince voters that they have the best formula for getting the country out of its current deficit malaise.

Story: Obama first to put tax increases on budget table

The outcome of that debate could set the country's budget course for many years to come.

"I think the debate has shifted and there is significant momentum now for making real progress in addressing our fiscal problems," said Mark Zandi, chief economist at Moody's Analytics.

Other analysts are not as optimistic that the government's deficit problems are any closer to being resolved.

"Nobody wants to face the facts," Wyss said. "We can't continue promising people more government spending than we are willing to pay for."

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Obama to announce plan to tackle deficit

  1. Closed captioning of: Obama to announce plan to tackle deficit

    >> a budget tug of war over spending and deficit cuts. president obama entering the ring tomorrow with what could be the first serious white house embrace of the simpson/bowles deficit reduction plan. commission recommendation gained little traction last fall, but now the president is expected to lean heavily on the bipartisan panel's proposals in his counter to house republicans. six senators, three from each party, meanwhile have been trying to turn the recommendations into legislation. can the president persuade congress to take a second look? with us now, msnbc's senior political analyst mark halperin , editor at large for "time" magazine and co-author of "game change." let's talk about what the president is planning tomorrow. what is your reporting telling you about exactly how far he's willing to go?

    >> he's going to be more specific than he was in his budget where he pretty much ignored these issues when he put out his budget at the state of the union . i think he's going to be trying to frame the issue in terms of the choices that the country faces. but he's not going to put down a marker that goes as far, i think, as paul ryan , the house republican budget chairman. it is not going to answer a lot of the questions that people still want to hear him answer, how much is he willing to compromise? i don't think being specific is necessarily going to help us to get to entitlement reform and deficit reduction tomorrow. he's got to be specific enough to keep things moving, but if he's very specific, i think the white house is right, it will all collapse right away.

    >> but doesn't he risk being accused, as he has been already by his opponents, of not being in the game, of not showing the courage that some would say the house republicans showed of not being part of the conversation?

    >> he could be accused of that. the president doesn't much care about being accused by washington pundits of things like that. he cares about results. again, it doesn't mean i agree with what he's trying to do in any particular case, but people misjudge him if they think he's caught up in what washington is going to say about him. the trick is, how do you get a deal because to get a deal, as david plouffe pointed out on "meet the press" on sunday it going to have to involve compromise with the house republicans. he proved he could compromise with john baner er iboehner in the lame duck session . he proved he could make a deal just last week over the weekend on the continuing resolution, he can get a deal, he's got to deal with the timing. i think he's going to need something like the threat of the default of the united states government in order to try to get people on his side to say we have no choice but to compromise.

    >> and can he keep the conversation on the fiscal side and not on the social issues? this is the co-chairman of the simpson/bowles panel, alan simpson , talking about all the social questions his own party was raising. this was on "hard ball" with chris matthews last night.

    >> we have homophobes in our party. that's disgusting to me. we're all human beings , we're all god's children. i'm not sickened with people who are homophobic, you know, and moral values while you're diddling your secretary while you're giving the speech on moral values . come on. get off of it.

    >> the incomparable alan simpson , part of the conversation about whether the abortion issue and other issues should be any part of the budget deal.

    >> those kinds of issues are going to come up. the president successfully kept a fair number of them out of the cr deal. i think the bigger issue for the president and fascinating to see how he frames this tomorrow, is can he win the fight more than he has on tax cuts for the wealthiest americans . paul ryan 's budget proposes big tax cuts for wealthy individuals and corporations. those add to the deficit in the short-term, even if you're a supply sider. you have to see that. the president has to figure out a way to try to win the fight and say i'm for raising revenue from the wealthiest americans . he couldn't win it during the lame duck session , couldn't win it over the past few months in trying to reframe the issue. the only way there is going to be deficit reduction is if there is tax increases, and entitlement cuts. the president is going to have to talk about both. the question is, can he put republicans more on the defensive on the tax cuts because he the tax increases because he many vu them if he gets serious deficit reduction.

    >> okay. mark halperin , you've completely -- perfectly teed this up for us. thank you very

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