A 'Bleak' Budget but Slightly Better (CBO Estimates Deficit of $1.35T, better than expected $1.4T)

Wall Street Journal ^ | 01/27/2010 | JOhn Mckinnon

[SeekAndFind]

The Congressional Budget Office on Tuesday called the U.S. budget outlook "bleak," in a forecast that hurts the chances for extending Bush-era tax cuts and raises pressure for fiscal belt-tightening.

In its annual report, the nonpartisan CBO pegged the 2010 U.S. budget deficit at $1.35 trillion, a slight decrease from the $1.4 trillion 2009 deficit that set a post-World War II record.

The report also contained grim projections for Americans looking for a brighter employment picture. The CBO predicts that unemployment, currently 10%, won't return to 5% until the middle of the decade. The report projects slightly lower growth in the near term compared with last year's estimates, because of the extent of damage from the recession.

The CBO said the government will run an aggregate deficit of about $6 trillion during the next decade, a level that many economists worry could lead to currency shock, inflation, crippling interest rates or other economic maladies.

At the end of 2009, debt held by the public exceeded $7.5 trillion, or about 53% of GDP, the CBO said in the report. By the end of 2020, "debt is projected to climb to $15 trillion, or 67% of GDP," CBO director Doug Elmendorf said on his blog post. "With such a large increase in debt…interest payments on the debt are poised to skyrocket."

The CBO estimate is almost certainly an understatement of the deficit problem. For example, the CBO is assuming that annual spending will rise with inflation, but Congress in recent years—even before the recent recession—has been boosting spending at higher rates. And President Barack Obama and many lawmakers in both parties want to extend at least some of the Bush-era tax cuts that are set to expire at year end,

[TexGuy]

Obama has already saved us $50 Billion! ... What a President! He is pure Genius! ... *cough*