U.S. budget deficit may balloon to $250 billion
WASHINGTON–The U.S. government deficit for the current budget year will jump to about $250 billion (U.S.) under Congressional Budget Office figures released yesterday, as a weaker U.S. economy and lower corporate profits weigh on the government’s books.
And that figure does not reflect more than $100 billion in red ink from an economic stimulus measure in the works.
"After three years of declining budget deficits, a slowing economy this year will contribute to an increase in the deficit,” the budget office report said.
The figure greatly exceeds the $163 billion in red ink registered last year. Adding likely but still unapproved outlays for the wars in Iraq and Afghanistan brings its "baseline” deficit estimate of $219 billion to about $250 billion, the non-partisan budget office said.
House budget committee Chair John Spratt Jr. said the 2008 deficit might reach $379 billion once the costs of an upcoming economic stimulus measure under negotiation between the Bush administration and Congress are factored in.
The budget office crunches economic and budget data for members of Congress.
Unlike an increasing number of economists, the budget office does not forecast a recession this year. It instead forecasts a growth rate of 1.7 per cent, down from 2.2 per cent real growth in the gross domestic product last year.
"Although recent data suggest that the probability of a recession in 2008 has increased, (the budget office) does not expect the slowdown in economic growth to be large enough to register as a recession,” the report said payday loans.
The budget office’s economic forecast was completed last month, before a recent spike in unemployment and the release of disappointing holiday retail sales figures.
"A number of ominous economic signs have emerged since (the budget office) finalized last month the forecast underlying today’s report,” Spratt said. "Today’s new economic forecast thus adds to the growing evidence that the economy has weakened, and that policy-makers in Washington must take action.”
Officially, the budget office predicts the 2008 deficit at $219 billion, but that figure fails to account for at least an additional $30 billion in war costs and the likely infusion of deficit-financed economic stimulus measures such as income tax rebates, business tax breaks and help for the unemployed now under discussion.
The deficit seems to be an afterthought as legislators race toward agreement with U.S. President George W. Bush on a plan to pump perhaps $150 billion worth of deficit spending into the economy. The bulk would come as tax cuts.
Most of an economic stimulus bill would be released before the Oct. 1 start of the 2009 budget year, with any benefits to the economy – and therefore federal revenues – lagging behind.
The White House is set to release its 2009 budget on Feb. 4, and Bush has promised a plan that would erase the deficit by 2012 if his policies are followed.
The 2006 deficit was $248 billion and had closed from a high of $413 billion registered in 2004.
Filed under: management, money by Specialist