WASHINGTON — The U.S. budget deficit this year will jump nearly 40% over prior forecasts, mostly due to the mammoth tax-cut package brokered by President Barack Obama and lawmakers last month, the Congressional Budget Office said Wednesday.
The CBO said the fiscal 2011 deficit will hit US$1.48-trillion, up from last August’s US$1.07-trillion estimate, which was crafted before Bush-era tax rates were extended at a cost of US$858-billion over 10 years.
The CBO “estimates that the act (renewing tax cuts) will increase the deficit by US$390-billion in 2011, by US$407-billion in 2012 and by US$120-billion in 2013,” according to the report.
While a deficit of nearly US$1.5-trillion in the fiscal year that ends Sept. 30 would be an all-time record in dollar terms, as a percentage of the overall economy it would be slightly below the US$1.41-trillion deficit in the 2009 fiscal year.
The US$1.48-trillion deficit, CBO said, would be about 9.8% of GDP, higher than the 8.9% of GDP in 2010, but below the 10% in 2009.
The new forecast is part of a semi-annual economic review by the CBO, the nonpartisan budget analyst for Congress.
The latest CBO estimates could exacerbate a deeply partisan debate in Congress and with Obama over the best way to tackle the US$14-trillion federal debt.
Some Republicans looked at the CBO report as further evidence of the need to cut federal spending, ignoring the impact of the tax-cut extension.
“Today’s CBO projections underscore what Republicans have been telling the Obama administration and its allies in Congress: The pursuit of a big government agenda is reckless, irresponsible and unsustainable,” said Representative Tom Price.
More:
http://www.financialpost.com/2011+deficit/4173549/story.html
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