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Although U.S. President Barack Obama has never set foot there, China cast a long shadow in the Pacific region where he grew up.

Obama, who will visit Shanghai and Beijing for the first time on November 15-18, spent much of his childhood in Hawaii, five time zones away from Washington, D.C.; and beginning in 1967, when he was six years old, he lived in Jakarta for four years.

At the time, China was in the throes of Chairman Mao Zedong’s bloody Cultural Revolution. Abroad, the nation was less interested in selling widgets than in promoting Mao’s brand of radical communism — a force the U.S. saw behind communist movements and political upheaval in Vietnam, Indonesia and elsewhere in Southeast Asia.

In 1979, Obama’s senior year at Punahou school in Honolulu, China and the United States normalized diplomatic relations, launching a three-decade period in which ties between the two grew inexorably tighter and deeper — and complicated.

“Think of what China was in 1979: It was an autarkic, insular, inward-looking country that was preoccupied with its own internal things,” said a senior U.S. official. “Even 10 years ago … there was still a sort of sense of ‘We’re not a part of these global rules, we’re not doing this stuff.’ Now they see themselves as sitting at the table.”

If there were any doubts that China would have a seat at the table from now on, Obama dispelled those when he sent Secretary of State Hillary Clinton there on her first official trip abroad — not Pakistan, Afghanistan or any other foreign policy hot spot.

“That the first major visit (was) to China, and to Asia as well, is symbolic of where the locus of international economic activity — and to some degree the locus of international activity, period — is going to be in the coming years,” said economist and author Zachary Karabell, whose new book “Superfusion” posits that the U.S. and Chinese economies have effectively merged.

Beijing, once considered a wallflower on global affairs, is in turn warming to its more prominent role, though it’s unclear that will translate into greater cooperation with Washington on issues like climate change and the nuclear disputes with Iran and North Korea — not to mention human rights differences.

U.S. Deputy Secretary of State James Steinberg highlighted the tension at the heart of the relationship in a speech in September. “Given China’s growing capabilities and influence, we have an especially compelling need to work with China to meet global challenges,” he said.

But Steinberg added that there was a tacit bargain in which the United States expects China to reassure the rest of the world that its growing role “will not come at the expense of security and wellbeing of others.”

That of course includes America’s.

“The big challenge there is going to be to maintain a competitive U.S. economy, and at the same time to maintain a high degree of stability and equanimity in the U.S.-China relationship,” said Clyde Prestowitz, president of the Economic Strategy Institute think tank.

Indeed, even as the United States and China have grown closer diplomatically, their economic and trade ties have deepened to the point of mutual dependence. Not only does China depend on the U.S. export market to fuel its highflying economic growth rates, the United States relies on China’s vast savings to help finance its burgeoning budget deficits.

“It is clearly unsustainable. This relationship helped give rise to global economic imbalances,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong. “If we are ever going to free ourselves of these imbalances, we need to reverse this relationship, get China to buy things in the U.S. and the U.S. to invest in China.”

“STAKEHOLDER” STRATEGY 

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McAfee Inc, the No. 2 U.S. security software maker, reported quarterly revenue that missed Wall Street projections as sales to consumers grew at their slowest rate in almost two years.

The company’s shares fell 4.5 percent as the revenue shortfall, which came in the wake of substantially stronger-than-expected earnings from bigger rival Symantec Corp, overshadowed better-than-expected profit.

McAfee on Thursday reported profit, excluding items, of 62 cents per share, in the third quarter ended September 30, above the average forecast of 60 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 18 percent to $485 million, below the $487 million average analyst forecast.

Sales of McAfee’s consumer software rose 8 percent from a year earlier to $177 million. It was the slowest rate of growth since the fourth quarter of 2007.

Its corporate business reported a 25 percent sales increase, posting quarterly revenue of $308 million.

Investors closely watch sales of consumer software because analysts say that such products are more profitable than programs for businesses. The company does not disclose the profits of each division.

McAfee also said that it has agreed to pay No cash till payday advance. 2 PC maker Dell Inc to recommend its security software to its customers worldwide for at least the next two years. McAfee has the right to extend for a third year.

“This relationship is very profitable for McAfee,” said Chief Executive Dave DeWalt, who has negotiated deals with other PC makers that have boosted sales of consumer software in previous quarters.

Those sales grew at a year-on-year rate of 13 percent in the second quarter and 12 percent in the first quarter.

The company forecast that it will report fourth-quarter profit, excluding items, of 61 to 65 cents per share on revenue of $505 million to $525 million. Analysts expect McAfee to post profit of 63 cents per share on revenue of $507 million.

Net income fell 25 percent to $37 million, or 23 cents per share, from $49 million, or 31 cents, a year earlier.

McAfee shares fell 4.5 percent to $41.80 from their New York Stock Exchange close of $43.75.

(Reporting by Jim Finkle, editing by Leslie Gevirtz)

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Iraq’s cabinet ratified a contract with BP and China’s CNPC to develop the super-giant Rumaila field, the first major new oilfield deal signed since the 2003 U.S. invasion, a senior licensing official said on Saturday.

Separately, Iraqi oil officials are in talks again with Royal Dutch Shell on revising its offer to operate the Kirkuk oilfield, after Europe’s biggest oil company failed to win the license in Iraq’s first bidding round in June.

Cabinet approval for the BP contract, which came late on Friday, sends “a strong signal” to other international oil companies seeking contracts to develop Iraq’s vast hydrocarbon resources, Abdul-Mahdy al-Ameedi, deputy director of Iraq’s Petroleum Contract and Licensing Directorate, told Reuters.

“We believe that we have a strong pillar now for our work toward realizing our plans,” he said in Istanbul, where Iraqi officials are meeting oil majors in a workshop on a second auction of oilfield contracts planned for December.

The oilfield contracts tendered this year are a central plank of Iraq’s aspirations to more than triple current oil production of 2.5 million barrels per day and catapult itself to third place from 11th in the league of oil producing nations.

The Iraqi Oil Ministry says that cabinet has the final say on the contracts, but some lawmakers insist that deals must also be sent to parliament for approval. An oil law to establish a framework for foreign investment has been delayed for years.

Analysts have said there are no guarantees contracts will be considered legal by future Iraqi governments, pointing to deep rifts among politicians over control of oil wealth. The next election is due to take place on January 16, 2010.

WORKHORSE

BP and CNPC were the only successful bidders in the first round at the end of June. The contracts on offer in both rounds are aimed at reviving the oil sector after the invasion and years of sanctions and under-investment.

Rumaila is the workhorse of Iraq’s oil industry, with capacity of 1.1 million barrels per day (bpd). Reserves are estimated at 16.998 billion barrels.

Production at Rumaila is expected to reach 2.8 million bpd after six years, Ameedi said. Iraq’s total output, including giant fields at Zubair and West Qurna, should be more than 7 million bpd by then, he said.

Shell representatives and Iraqi officials, meanwhile, have held fresh talks to negotiate a service contract for the oilfield of Kirkuk, Ameedi said. At the first auction of oilfield contracts in June, Shell balked at accepting the low $2 per barrel fee that Iraq was willing to pay for operating the field.

“We are concerned about the technical proposal, about the remuneration fees. All these things are being discussed,” Ameedi said.

Iraq has reduced taxes and improved terms to make deals more profitable after the lacklustre response in June’s auction.

Earlier this month, a consortium led by Italy’s Eni crept closer to inking a deal to develop Zubair, yet to be signed, and Iraqi officials have said they are close to agreeing on a service contract for West Qurna. 

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In the 1980s, when stocks mostly surged, a few mutual fund managers became the equivalent of rock stars.

Tops among them: Peter Lynch, who racked up average annual returns of a remarkable 29 percent over a 13-year run.

Lynch did it at Fidelity Magellan, which continued to grow after he left in 1990. What once was the world’s largest fund swelled from $13 billion to nearly $110 billion a decade later. Assets peaked three years after the fund shut its doors to new investors because it became so big it was hard to manage effectively.

So where is Magellan now? It’s at $24 billion, and struggling to draw investors who fled in droves after years of mediocre performance. Magellan is still big by any standard, but it’s merely Fidelity’s fourth-largest stock fund.
"I don’t worry about too many assets now," says current manager Harry Lange, who took over in late 2005.

Magellan reopened to new investors early last year, but those who gave it a try were disappointed. The fund’s 2008 plunge? Forty-nine percent — steeper than the market’s nearly 39 percent decline. Blame bad bets on dogs like AIG and Wachovia — financial companies that Lange held on to for too long.

But Lange is turning things around, thanks to a sharp departure from his predecessor’s style. Where Robert Stansky was criticized for too closely mirroring broader markets, Lange has tilted the fund heavily in favor of growth stocks — companies whose comparatively steep share prices are backed by expectations that earnings will keep growing rapidly. He’s eased out of cheaper value stocks with steadier earnings, and takes a go-anywhere approach in keeping with the fund’s namesake 16th century explorer. Nearly one-quarter of Magellan’s holdings are international stocks.

Many of the same bets on riskier stocks that weighed Magellan down last year are lifting it in 2009. It’s up 35.6 percent, easily topping the nearly 17 percent gain for its benchmark, the Standard & Poor’s 500, and beating nearly nine of 10 of its peer funds.

So is it time to climb back aboard Magellan? Only if you’re willing to commit to a fund whose penchant for racy stocks makes it unusually volatile.

This year, the fund expanded its already substantial stake in recently hot technology stocks — its second- and third-largest holdings are specialty glass maker Corning Inc. (up 62 percent this year) and semiconductor maker Applied Material (up 34 percent). It’s also favored hard-hit fare like home builder Toll Brothers (down 8 cash advance.8 percent) and big banks — Magellan’s most recent list of top 10 holdings included Bank of America, J.P. Morgan Chase, Wells Fargo and Goldman Sachs.

Lange has turned Magellan into "a fund for optimists," according to Morningstar’s lead Fidelity analyst, Christopher Davis.

"If you look at its portfolio, it’s positioned for an economy that’s improving," Davis says, noting an absence of such defensive favorites as Wal-Mart and Procter & Gamble.

Lange says this year he’s slightly eased off his leaning toward growth stocks but still heavily favors the category. Though value stocks outperformed growth for an eight-year run after the dot-com bubble deflated early this decade, the pendulum swung back to growth last year — financial stocks that were hit so hard last year are mostly in the value category. Growth’s ranks include plenty of tech names that have recently fared well.

Lange still likes tech because of its big stake in emerging markets, where consumers in countries like China and India continue to drive growing demand for gadgets including mobile phones from makers like Nokia, Magellan’s top holding. He figures that trend will continue giving growth an edge over value. "I’m pretty confident that growth will be as strong in the next six to 12 months," Lange says. "There are a lot of people out there who think after that, it will be a sluggish recovery. I’m more bullish than that."

As for his fund’s choppiness, Lange acknowledges that with his growth-oriented style, "it’s pretty tough not to have volatility in these unusual times."

Even with this year’s strong results, winning back investors who fled Magellan has proved tough. Lange is still trying to shake the cumulative record of the last 10 years, a period when Magellan posted an average annual loss of 1.2 percent, slightly worse than most of its peers.

"This is not your grandfather’s Magellan fund," says Jim Lowell, a former Fidelity employee who runs an independent newsletter, FidelityInvestor.com, that evaluates the company’s funds.

Lowell currently recommends Magellan but says it’s no longer appropriate as a core retirement holding for investors who are looking for the broad exposure it once offered. Instead, Magellan is geared toward those seeking more growth exposure in an otherwise diversified portfolio.

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Treasury Secretary Timothy Geithner said on Thursday that a strong dollar was very important to the United States and the rest of the world needs to be convinced Americans will be more thrifty in future.

“A strong dollar is very important to this country, I mean that, and it’s very important that people recognize it,” he told a news forum at the Newseum in downtown Washington.

Speaking just before departing for Istanbul, Turkey, for a Group of Seven finance ministers’ meeting, Geithner said the dollar’s “exceptional” role in the global financial system invests the United States with extra responsibility.

Questions have been raised about whether the world will be willing to keep financing huge American debts forever or whether they might seek an alternate reserve currency.

Geithner made clear, in response to questions, that he was aware of the debate and of the importance of persuading others that the United States was willing to take measures to preserve the currency’s value.

“It does bring special responsibilities and burdens on the United States and it’s very important that we make not just Americans but make the world understand that we are going to go back to living within our means,” he said.

Geithner added, “And we are going to make sure that our independent Federal Reserve keeps inflation low and stable over time…and we are going to run fiscal policy in this country consistent with that basic objective of going back to living within our means.”

The U.S. is headed for a record deficit of around $1.8 trillion this year and, according to the Congressional Budget office, an estimated $1.4 trillion deficit in fiscal 2010.

Geithner said there were signs of global economic recovery, which would produce more revenues, but he stressed they were only tentative signs at this point.

He said the financial crisis the world continues to work through stemmed partly from the fact that central banks kept interest rates too low for too long and created conditions for an asset bubble that eventually burst.

“There was a long period where monetary policy around the world was very, very loose and accommodative,” Geithner said, adding that allowed risk-taking to become excessive.

“You had a huge boom in wealth outside the United States and that money was looking for a home and it created huge demand progressively for what proved to be very risk types of financial assets,” Geithner said, adding that government “failed the test” of preventing the buildup in risk.

(Reporting by Glenn Somerville; Editing by Andre Ricci)

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AIG has stabilized thanks to a massive government bailout, but more than $120 billion in taxpayer loans to the insurance company remain at risk, according to a report issued Monday by a bailout overseer.

The Government Accountability Office, which oversees Treasury’s $700 billion Troubled Asset Relief Program, said the government’s efforts to support AIG (AIG, Fortune 500) have largely succeeded in propping up the company. But AIG continues to rely heavily on federal assistance to maintain that stability.

The GAO said Federal Reserve loans and Treasury Department investments continue to be AIG’s primary source of credit. Similarly, the company’s steady credit rating, recent profitable quarter and adequate capital levels would not have occurred without taxpayer assistance.

Continued government support will be necessary until AIG can restructure its operations. But that government assistance carries "significant exposure" to credit and investment risks, given taxpayers’ enormous loans and 79.9% interest in AIG, according to the report.

Some AIG operations, including the company’s core insurance business, are showing signs of strength. Still, GAO said it is too soon to determine if the insurer’s stability is a trend or simply an anomaly. Until AIG can demonstrate stability over the long haul, it will be unable to pay its loans back.

AIG plans to pay back the government by selling off pieces of the company. Those asset sales have been slow-going and sold at depressed values thus far, as credit remains tight. AIG has made only $8.6 billion on those deals to date, and has paid back just $1.4 billion on the roughly $38 billion Fed loan. AIG has paid back $6.8 billion of a separate $35 billion New York Fed loan and has not paid any of its TARP loan back.

The insurer still owes taxpayers $120.6 billion, according to the report. Since the company does not make enough profit to repay its loans, AIG has agreed to sell off two huge chunks of its business to the Fed to reduce its debt to taxpayers by $25 billion.

Oversight Committee to review Greenberg proposal

Meanwhile on Monday, House Oversight Committee Chairman Edolphus Towns, D-N.Y., said he is looking into a proposal by former AIG Chief Executive Hank Greenberg to slash the government’s stake in AIG to about 20%, scale back the interest rates AIG is paying on its the loans, and lengthen the term of the insurer’s loan to give AIG sufficient time to get better value from its asset sales.

Greenberg, who was chief executive of AIG from 1968 until 2005, has long argued that the government needs to give AIG a less onerous bailout in order to reduce risk and maximize the potential benefit for the taxpayers. Greenberg was not immediately available for comment.

Shares soared on the news, gaining 21% in late afternoon trading on Monday. Shares have risen 275% since the beginning of August, when the company announced it would appoint former MetLife CEO Robert Benmosche as its new chief executive.

The stock has risen despite repeated statements from the company that it won’t likely be able to repay the government in full for three to five years.

A spokesman for AIG said Monday that the insurer continues to work with government regulators and overseers to ensure taxpayer money is being put to good use.

"We are pleased to have had the chance to work closely with the GAO in its efforts to produce a thoughtful and comprehensive report," said Mark Herr. "AIG remains committed to reducing risk and repaying taxpayers." 

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Parents who install a leading brand of software to monitor their kids’ online activities may be unwittingly allowing the company to read their children’s chat messages — and sell the data gathered.

Software sold under the Sentry and FamilySafe brands can read private chats conducted through Yahoo, MSN, AOL and other services, and send back data on what kids are saying about such things as movies, music or video games. The information is then offered to businesses seeking ways to tailor their marketing messages to kids.

The company that sells the software, EchoMetrix, insists it is not putting kids’ information at risk, since the program does not record names or addresses. But the software knows how old they are because parents customize its features to be more or less permissive, based on age.

In June, EchoMetrix unveiled a separate data-mining service called Pulse that taps into the data gathered by Sentry software to give businesses a glimpse of youth chatter online low interest auto loans. While other services read publicly available teen chatter, Pulse also can read private chats. It gathers information from instant messages, blogs, social networking sites, forums and chat rooms.

EchoMetrix CEO Jeff Greene said the company complies with privacy laws and does not collect identifiable information.

Parents who don’t want the company to share their child’s information can check a box to opt out. But that option can be found only by visiting the company’s website, accessible through a control panel after the program is installed.

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Markets tumbled Tuesday, as investors retreated at the start of what is typically a rough month, betting that the six-month stock advance has raced ahead of the economic recovery.

"I think we’ve had a nice run and it’s time for a bit of a pullback," said Tom Schrader, managing director at Stifel Nicolaus. "I wouldn’t be surprised if we moved back to the 880 level (on the S&P 500) before moving back up."

A drop to the 880 level would constitute a slide of about 12% from the current levels.

Investors nitpicked through the morning’s better-than-expected reports on housing and manufacturing but found little reason to jump back into the fray.

The Dow Jones industrial average (INDU) lost 186 points, or almost 2%. The S&P 500 (SPX) index fell 23 points, or 2.2%. The Nasdaq composite (COMP) fell 40 points, or 2%.

"I think the ‘whisper number’ for [the manufacturing report] was higher and once people digested that, the market swung in the other direction," said Schrader.

Schrader said that investors were also reacting to the "calendar influence," amid a variety of reports about the tendency for September to be a weak month on Wall Street. September is typically the biggest percentage loser of the month for the Dow, S&P 500 and Nasdaq composite, according to the "Stock Trader’s Almanac."

"The reports this morning were positive, but investors are basically saying that stocks have had a good run up and now it’s time to take some profits," chimed in Phil Orlando, chief equity market strategist at Federated Investors.

Stocks have essentially been on the rise since March, as investors have welcomed extraordinary fiscal and monetary stimulus and signs that corporate profits and the economy have stabilized. The major gauges ended last week at the highest levels in 9 to 10 months. Financial shares took a beating Tuesday after enjoying a nice ride through the late summer, fueled largely by speculation and momentum.

But with the S&P up 52% from the March 9 lows, market participants are now looking for concrete evidence that the economy is recovering. The morning’s reports were positive, but perhaps not as positive as the most optimistic forecasts.

Wednesday preview: Two readings on the labor market are due Wednesday in the lead up to Friday’s big August jobs report.

Payroll services firm ADP is expected to report that employers in the private-sector cut 246,000 jobs from their payrolls in August after cutting 371,000 in July.

Additionally, Challenger, Gray & Christmas, an outplacement firm, will report on the number of announced job cuts in August.

A July reading on factory orders is also due in the morning from the Commerce Department. Other reports include the minutes from the last Federal Reserve policy meeting, the weekly crude oil inventories report and the July reading on factory orders.

Manufacturing: The Institute for Supply Management’s manufacturing index for August showed growth in the sector for the first time since January 2008. The index rose to 52.9 from 48.9 previously. Economists surveyed by Briefing.com thought it would rise to 50.5.

Pending home sales rose for the sixth straight month, jumping 3.2% in July, to the highest point in nearly two years, according to a report from the National Association of Realtors released Tuesday morning. The index rose 3.6% in June. Economists surveyed by Briefing.com thought sales would rise 1.5% in July.

Construction spending fell 0.2% in July versus forecasts for an unchanged reading. Spending rose a revised 0.1% in June.

Financials: Many of the summer’s big bank sector winners led the declines Tuesday.

Dow component Bank of America (BAC, Fortune 500) slipped 6.4% in active NYSE trading. BofA was the biggest Dow gainer in the June through August period, rising 56%.

Dow component American Express (AXP, Fortune 500) lost 5.4% Tuesday. Over the last three months, AmEx has gained 36% and was the second-best Dow performer.

Dow component JPMorgan Chase (JPM, Fortune 500) lost 4.1% after rising 17% this summer.

Among other movers, Citigroup (C, Fortune 500) lost 9% after rising 34% in the summer. Regional bank Fifth Third Bancorp (FITB, Fortune 500) lost 6.2% after rising 59% this summer.

The KBW Bank (BKX) index fell 5.8% after rising 20% over the summer.

Oil prices and stocks: U.S. light crude oil for October delivery fell $1.91 to settle at $68.05 a barrel on the New York Mercantile Exchange. Oil prices have been slipping since hitting a ten-month high just below $75 a barrel late last month.

The decline in oil prices dragged on heavily-weighted energy stocks including Dow components Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500).

Auto sales: The government’s popular Cash for Clunkers program gave a boost to sales in August, major automakers said. Although a plunge in sales in the last week of the month, following the program’s end, suggests the impact will not be far reaching.

In August, Ford Motor (F, Fortune 500) reported that sales jumped 17% versus a year ago, its best monthly gain in 4 years. However, the advance was short of expectations for a rise of 22%, according to analysts surveyed by Edmunds.com.

Toyota, which had the most Clunker sales of any automaker, said August sales rose 6%, its first year-over-year gain in 16 months.

General Motors (GM, Fortune 500) and Chrysler Group both reported year-over-year declines in August on sales that improved from July.

Company news: Online auctioneer eBay (EBAY, Fortune 500) said it will sell a large stake in its Skype Internet phone business to a group of investors for $2.75 billion.

World markets: European markets tumbled, while Asian markets ended higher. On Monday, a selloff in Chinese markets sparked a broader global selloff.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.37% from 3.40% late Monday. Treasury prices and yields move in opposite directions.

Other markets: COMEX gold for December delivery rose $3.50 to settle at $957 an ounce.

In currency trading, the dollar gained versus the euro and the Japanese yen.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by five to one on volume of 1.63 billion shares. On the Nasdaq, decliners topped advancers by almost four to one on volume of 2.81 billion shares.

How does your portfolio look nearly one year after the collapse of Lehman Brothers? What investment choices hurt you or helped you the most? What strategy changes are you making for the future? Tell us your story. E-mail realstories@cnnmoney.com and your thoughts could be part of an upcoming story. For the CNNMoney.com Comment Policy, click here. 

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Ford Motor Co. said Thursday that it would add a third shift to production plants in Michigan and Missouri to meet increased demand for its F-150 trucks and Escape crossover vehicles.

The moves offer specifics about Ford’s plan to increase production in the fourth quarter by 33 percent over 2008 levels to a total of 570,000 vehicles.

Ford is gaining market share in the U.S., and two of its vehicles — the Focus and Escape — were among the top-sellers under the Cash for Clunkers program in July and August.

The automaker said earlier this month that it would increase production to replenish inventories depleted during the Clunkers program, although it expects September sales to fall below July and August levels.

Ford said it would not hire new hourly workers to handle the shifts, but would move workers from the truck production line at its Kansas City Assembly Plant to the line that makes Ford Escapes and Mercury Mariners, 5-passenger crossover utility vehicles.

The change takes place at the Claycomo, Mo., plant in October. Ford employs 3,956 hourly workers there, who previously agreed to work two days during a planned shutdown week this month to meet third-quarter production demands.

The company said third-quarter production levels would be 18 percent higher than a year ago.

Ford’s Dearborn Truck Plant will resume maximum operation of three shifts in late September. While there are currently three separate crews at the plant, they work on a rotating basis. Each works for four weeks and is then on "layoff" for two, said Ford spokeswoman Marcey Evans.

The moves will result in the additional production of 10,000 F-150 pickup trucks this year and 2,400 Escapes and Mariners by the end of October, Ford said.

The company had a 21-day supply of Escapes in early August. At the end of July, Ford had nearly 300,000 vehicles in stock, a 48-day supply, the industry average, according to Ward’s AutoInfoBank. Ford typically maintained a 70-day supply earlier this year.

Ford is expected to report a year-over-year increase in August U.S. sales next week.

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In just over a month, the federal government’s fiscal year will draw to a close, leaving in its wake one of the biggest annual deficits in U.S. history — and a forecast of more record debt to come.

Just how much more will be the question on Tuesday.

The Congressional Budget Office and the White House Office of Management and Budget are set to release separate updates of their 10-year deficit estimates, along with updates on their economic outlooks.

The agencies’ previous estimates — based on the president’s proposed 2010 budget — were about $2 trillion apart.

The CBO, which serves as Congress’ official scorekeeper, had the higher estimate: $9.14 trillion over 10 years or 5.2% of gross domestic product.

By comparison, the Obama administration’s budget office forecast a $7.11 trillion deficit or 4% of GDP.

The White House’s economic estimates were seen by many as too optimistic. For instance, the administration estimated that unemployment would hit a peak of 8.1% this year. Actual unemployment numbers have already surpassed that level — hitting 9.4% in July. And many economists expect the number to reach 10% before too long.

Last week, White House officials said their new 10-year deficit forecast will be in the neighborhood of $9 trillion, in part because Uncle Sam is pulling down less tax revenue than expected. That would bring it more in line with the CBO’s previous forecast.

Analysts say the best-case scenario on Tuesday would be if the CBO’s updated deficit forecast stays very much in line with its earlier $9 trillion estimate.

That’s because foreign investors who buy U.S. debt have already factored in that amount.

"If [the CBO] numbers come in higher, that would be cause for concern," said Sean West, U.S. policy analyst at the Eurasia Group, a political risk research firm.

The concern, of course, is that foreign governments and other foreign investors could demand higher interest rates or stop buying as much U.S. debt.

One mitigating factor — in the near-term anyway — is the rapid rise in the U.S. savings rate over the past year. That’s because banks can make money by investing savers’ deposits in U.S. Treasurys, which pay more than what the banks have to pay customers on deposits.

"Rising U.S. savings will offset the need to find foreign investors," said Ross Schaap, Eurasia’s director of comparative analytics.

But even domestically financed deficits come at a cost if they grow too large for too long.

"Deficits will gradually divert capital from productive domestic uses, through a rise in interest rates. This diversion reduces the amount of capital available to U.S. workers, lowering their wages and hence their living standards," deficit experts Alan J. Auerbach and William G. Gale wrote in a CNNMoney.com commentary. "If our deficits are financed from abroad, interest rates may not rise as much, but interest payments on these deficits will flow back abroad."

Where’s the exit?

The deficit forecasts on Tuesday will underline the pressures facing President Obama in a weak economy.

It may make political sense to declare that the majority of Americans will not see their taxes go up, as Obama has done repeatedly, West said. But the administration eventually will have to come up with a sufficient exit strategy from the ballooning levels of federal debt, he noted.

That’s not to say the administration has been silent on the issue. To the contrary, the White House has pushed for pay-as-you-go rules that would require Congress to pay for spending increases or new tax cuts. It has also proposed $17 billion worth of spending cuts.

Most notably, Obama has been pushing for health care reform to help bring the deficit in line since runaway health care costs are a major problem.

At the same time, the White House has said it would exempt from pay-go policies some of its priciest proposals, such as extending the 2001 and 2003 tax cuts for most households. And the course of health care reform is anything but a straight line to lower costs, no matter whose proposal takes top spot at the end of the day.

- CNN’s Ed Henry and Rebecca Sinderbrand contributed to this report 

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