WASHINGTON (AP) — A new budget report released today predicts the government will run a $1.1 trillion deficit in the fiscal year that ends in September, a slight dip from last year but still very high by any measure.
The Congressional Budget Office report also says that annual deficits will remain in the $1 trillion range for the next several years if Bush-era tax cuts slated to expire in December are extended, as commonly assumed.
The report is yet another reminder of the perilous fiscal situation the government is in, but it’s commonly assumed that President Barack Obama and lawmakers in Congress that little will be accomplished on the deficit issue during an election year.
The CBO study also predicts modest economic growth of 2 percent this year and forecasts that the unemployment rate will remain above 8 percent this year. That is based on an assumption that President Barack Obama will fail to win renewal of payroll tax cuts and jobless benefits by the end of next month.
The new figures also show that last summer’s budget and debt pact has barely made a dent in the government’s fiscal woes.
The pact imposed $2.1 trillion in spending cuts over 10 years, but the latest estimates predict $11 trillion in accumulated deficits over the 2013-2022 time frame if the Bush-era cuts in taxes on income, investments, large estates and on families with children are renewed. Obama has proposed largely extending them, but allowing them to expire for upper-income taxpayers.
The deficit would require the government to borrow 30 cents of every dollar it spends. Put another way, the deficit will reach 7 percent of the size of the economy, a slight dip from last year’s 8.7 percent of gross domestic product.
The CBO report shows that the deficit dilemma would largely be solved if the tax cuts enacted in 2001 and 2003 — and renewed in 2010 through the end of this year — were allowed to lapse. Under that scenario, the deficit would drop to $585 billion in 2013 and to $220 billion in 2017.