U.S. projects the biggest deficit since World War II. Can the country borrow its way back to prosperity?

If you thought 2008 was bad for the economy, wait till you hear what the U.S. government is predicting for 2009.

According to a report released Wednesday by the Congressional Budget Office (CBO), the U.S. federal deficit will reach $1.2 trillion in 2009--more than twice the figure last year. Unemployment will climb to 8.3% this year and top 9% in 2010. Real economic output will decline by as much as 2.2%. The U.S. will be faced with the lingering specter of deflation and a continued correction in the housing market.

And that's before Congress enacts an economic stimulus package that could add another $775 billion or more to the deficit.

In fact, the CBO estimate says the current recession "will probably be the longest and the deepest since World War II" and will probably last well into the second half of 2009.

Shocking? Hardly. But Barack Obama's incoming administration, which takes office in less than two weeks, certainly has its work cut out for it. On Thursday, Obama is scheduled to make a major speech in Virginia on the economy and his plan to fix. This week he has warned several times of the possibility of trillion-dollar deficits in years to come.

"If we continue to do nothing, we will continue to see red ink as far as the eye can see," he said.

Reasons abound for the ballooning deficit, including a 6.6% decline in tax revenues compared to 2008; more than $180 billion in transaction costs associated with the Troubled Asset Relief Program (TARP), the Treasury Department's bailout fund for the U.S. economy; the $240 billion price tag of the government's takeover of mortgage buyers Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ); and increased spending on unemployment compensation.

FastDeeds.com offers deed alert program to help prevent against mortgage fraud!. Go to http://www.fastdeeds.com