Welcome, Mr. President: Here's the tab

Election Guide

Your Money: McCain vs. Obama

See where the presidential candidates stand on the major economic issues.

View guide

• Hiring holds steady
• Half of 'rescued' borrowers still default
• Job outlook gets gloomier
• Where the jobs are
• Where the jobs are

Issue #1: America's Money - Everyday on CNN

Housing bill: To your rescue?

More Videos

Quick Vote

If gas prices continue to go down, I will:

• Go back to old driving habits
• Drive the same way I do now
• Still find new ways to save gas

or View results

NEW YORK (CNNMoney.com) -- They're not running for poet laureate. But surely John McCain and Barack Obama are aware of the cautionary verse from Scottish poet Robert Burns: "The best-laid plans of mice and men often go awry."

Both presidential candidates have on tap a lot of expensive plans they believe will benefit the economy. Paying for them won't be so easy.

On Monday, the White House estimated a record $482 billion deficit for the 2009 fiscal year. And that doesn't include an additional $80 billion in war costs.

Of course, running deficits isn't always a bad thing, and sometimes they can be deemed necessary even by deficit hawks. Spending money to stimulate the economy during a downturn is one example.

But left to grow over time, deficits start to limit lawmakers' latitude in creating and amending public policies. And that can really put a crimp in a new president's style.

"It certainly doesn't make it any easier for them," said Roberton Williams, principal research associate at the Tax Policy Center and the former deputy assistant director for tax analysis at the Congressional Budget Office.

To date, the country's total debt - which includes the annual deficits accrued over time - is $9.5 trillion.

Congress just passed - and President Bush is expected to sign - a housing bill that increases the country's statutory debt limit to $10.6 trillion from $9.8 trillion. Lawmakers increased the debt limit because they've already made spending commitments - including additional spending on Iraq - that threatens to pierce the current $9.8 trillion ceiling.

The U.S. government is like anyone with a nearly maxed out credit card: the more debt the country accrues, the more it must pay in interest, which makes it harder to run down the original debt.

And the picture gets worse when the rates go up. That could happen to Uncle Sam if those who buy U.S. debt grow concerned about the country's ability to pay what it owes, or because inflation starts to erode the value of bond yields.

The end result: "Taxpayers have to pay more and more on the national credit card," Robert Bixby told CNN on Monday. Bixby, executive director of the deficit watchdog group The Concord Coalition, said the country paid $200 billion in debt interest last year alone.

One possible scenario: the government will have to issue more debt as Baby Boomers retire to pay back the several trillion dollars it has borrowed from Social Security over the years. Issuing more debt to pay off Social Security could create a situation of more supply than demand among debt investors, causing the government to pay a higher yield to make its bonds more attractive, Williams said.

Those concerns are already baked into the fiscal cake. But when the next president takes office, he could end up worsening the debt picture if some of his proposals don't pan out perfectly.

Relative to current law, which assumes all tax cuts expire by 2011, the Tax Policy Center in its most recent analysis estimates that both candidates' plans may increase the long-term deficit significantly: McCain by $5 trillion over 10 years and Obama by $3.4 trillion.

The numbers look a lot better when compared to current policy - which assumes today's tax cuts likely will be extended after 2010. McCain's plan would increase the deficit by $600 billion while Obama's would actually raise an additional $800 billion in revenue, according to the Tax Policy Center's estimates.

But two caveats: None of these numbers include the costs of the candidates' health care proposals, which run as high as $1.3 trillion for McCain and $1.6 trillion for Obama. Nor do they account for built-in spending obligations on Social Security and Medicare. "Neither candidate has proposed a plan that will bring in enough revenue to cover projected spending," Williams said.

So that means to bring the budget back into greater balance, they'd need to slash government spending.

Both candidates have said they would cut spending in a variety of ways. For instance, they have said they will save money when the country withdraws from Iraq. Experts say that doing so may curb future spending - i.e., not incur more debt down the line - but doesn't reduce existing debt. And in the near term, the cost of drawing down troops may actually cause a short-term increase in the deficit.

And both candidates have said they'd eliminate or reduce earmark spending. But those types of promises may be hard to keep since it's not up to the president alone to decide, Williams said. "We know how much luck presidents have in getting spending cuts through."