New CBO Report Predicts $1Trillion Deficit for Fourth Straight Year
- Posted on January 31, 2012 at 1:29pm by
Christopher Santarelli
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(AP) — A new budget report released Tuesday 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 — and if Congress is unable to live within the tight “caps” the lawmakers themselves placed on agency budgets last year.
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 will be able to accomplish little on the deficit issue during an election year. The report was slightly more pessimistic than CBO’s most recent projections last summer and would mean the fourth straight year of trillion-dollar-plus deficits.
The first wave of statements from lawmakers had a familiar ring as each party cast blame on the other.
“Four straight years of trillion-dollar deficits, no credible plan to lift the crushing burden of debt,” said House Budget Committee Chairman Paul Ryan, R-Wis., “The president and his party‘s leaders have fallen short in their duty to tackle our generation’s most pressing fiscal and economic challenges.”
“We will not solve this problem unless both sides, Democrats and Republicans, are willing to move off their fixed positions and find common ground,” said Senate Budget Committee Chairman Kent Conrad, D-N.D. “Republicans must be willing to put revenue on the table.”
The CBO study also predicts modest economic growth of 2 percent this year and forecasts that the unemployment rate will be 8.9 percent on Election Day. 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.
That jobless rate is higher than the rates that contributed to losses by Presidents Jimmy Carter (7.5 percent) and George H.W. Bush (7.4 percent). The agency also predicts that unemployment will average 9.1 percent in 2013 and remain at 7 percent or above through 2015.
CBO Director Douglas Elmendorf, however, told reporters that extending the two percentage point cut in Social Security payroll taxes would only lift the economy by perhaps one-fourth of a percentage point this year and would likely yield only a 0.1 to 0.2 percentage point drop in the jobless rate.
The agency’s budget projections are worse than those issued last summer, in large part because its views on the economy are more pessimistic now. Last August, CBO predicted a $953 billion deficit for 2012 fiscal year. Corporate tax receipts are sharply lower than anticipated last year.
On the economy as a whole, CBO now predicts 2 percent growth from the fourth quarter of 2011 to the fourth quarter of this year, a 0.7 percentage point drop from its August numbers. Its predictions of the jobless rate are 0.4 percent higher.
“We have not had a period of such persistently high unemployment since the Depression,” Elmendorf said.
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 lawmakers are already talking about easing across-the-board spending cuts required under the agreement. The modified estimates predict $11 trillion in accumulated deficits over the 2013-2022 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.
Extending the full range of the Bush tax cuts costs $5.4 trillion over the coming decade, CBO says. Elmendorf said allowing tax rates to increase for families making more than $250,000 a year as Obama has proposed would shave perhaps $1 trillion from the 10-year costs of extending the tax cuts.
Last year, Obama and House Speaker John Boehner, R-Ohio, tried but failed to reach a “grand bargain” on the deficit, an effort that got hung up over taxes and cuts to major benefit programs like Medicare. A subsequent attempt by a congressional “supercommittee” to find smaller saving sputtered over the same issues.
What’s left is a heap of unfinished business that comes to a head at the end of the year: expiring tax cuts and painful across-the-board cuts to the Pentagon and many domestic programs. To top it off, another politically toxic increase in the debt limit will be needed at some point shortly after the November elections.
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.
But expiration of those tax cuts would slam the economy, CBO said, bringing growth down to a paltry 1.1 percent next year. However, the economy would quickly rebound in 2014 and beyond.
Obama is scheduled to release his 2013 budget on Feb. 13.
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thindime
Posted on January 31, 2012 at 4:50pmNo surprises here. Government spending skyrocketed 30% in the first year or two of Obama and has been rising ever since. Cutting back to 2008/09 spending levels (pre-Obama) would eliminate the trillion dollar annual deficit since that is about the amount the he and the Dems added at the time.
Report Post »Collbuzz
Posted on January 31, 2012 at 4:22pmYAY!!!!!!!!! Thanks Dumbocrats!, Well done a-holes.
Report Post »RightPolitically
Posted on January 31, 2012 at 4:19pmGuys like Democrat Kent Conrad are the problem. He wants Republicans to put “revenue” on the table. That’s just a fancy way of saying: raise taxes. If the country is spending more than they take in, year in and year out, that means spending is a priority to Washington politicians, not cutting back on it. That said, why would any sane person want to through new tax revenue down the drain? Not literally, but figuratively speaking, these bastards ought to be taken out and shot for destroying America.
Report Post »RightPolitically
Posted on January 31, 2012 at 4:10pmIt’s insane. All this to protect the politicians who have mismanaged the country for more that half a century. Things are either going to change drastically at the polls or I am afraid a second American Revolution will take place.
Report Post »verycold
Posted on January 31, 2012 at 4:05pm“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.”
There is no way in the world that the CBO can make such an assertion. I have the CBO’s budget forecast right in front of me that they did last year. The smallest deficit they assumed through 2021 was around 2015 which as 764 billion and then rising after that. Keep in mind that the government is collecting revenue now to implement Obamacare as a front loader and thus skewing the revenue numbers.
If the tax cuts on those making 200,000/250,000 were to lapse as Obama would like, that would be 100 billion in revenue each year which is paltry when you look at the entire 1 trillion deficit.
Keep in mind that the IMF is now calling for its members to significantly increase funds to back stop the Europe crisis which means the US will need to contribute another 100 billion to pay for their ratio share.
Also keep in mind that the GAO said that last year approx 125 billion was misspent mostly due to medicare and that they have no way to retrieve that money from those they overpaid.
The corporate subsidies you hear so much about amount to 102 Billion. Conversely the itemized deductions for mortgage, state taxes, and charitable contributions amount to 221.6 Billion.
Ref
Report Post »Detroit paperboy
Posted on January 31, 2012 at 3:58pmCriminals and thieves….. Nothing more !!!! Both Parties….
Report Post »Dcjones
Posted on January 31, 2012 at 3:45pmOur problem goes so much deeper than just Obama. Although he is terrible, most people miss the main issue. This is only allowed to go on because we have a Central Bank that enables it and steals the purchasing power from the working class letting the rich benefit. WE NEED TO ABOLISH THE FED!
We need a hard currency or paper linked to metal. Interest rates would be set by the amount of savings in society (supply) and the amound of demand for capital. In this enviroment, debt use would be more limited to only the most productive endevors and would not be able to be used by central planners to juice up GDP and employment artificially. Goverments would have to limit SPENDING. If there is too much debt in this environment then the interest rates would go up to correct the situation of higher risk and demand for cash. This is how a true free market works. We do not live in a free market, it has been manipulated since 1913 by the fed.
Only in the upsidedown world of government manipulated markets does a nation with no savings, diminished industrial capacity, and a mountain of unfunded entitlements enjoy low interest rates .
Report Post »Economist
Posted on January 31, 2012 at 3:48pmJust wait and see what happens when interest rates go up!! LOL what will happen to the US when we have to pay 2.5 trillion in interest a year on our debt and our tax income is at 2.5 trillion. At the same time spending 4.5 trillion. We will need to borrow 4.5 trillion a year! Can you say no Social security?? Can you say no Medicare? Can you say no Military? If we cant secure loans for 4.5 trillion a year from Asia (which will not happen because Asia is now declining) we will have to make DRASTIC cuts in the near future.
What will happen to housing prices when Mortgage rates are at 10 to 12%??????? We are BROKE BROKE BROKE.
How does Ron Paul look now? eh?
Report Post »justangry
Posted on January 31, 2012 at 3:44pmProbably ought to add a trillion or two on top of that estimate since war with Iran seems iminent.
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