Far from slowing, the government’s deficit spending will surge to a record US$1.5 trillion this year, congressional budget experts estimated, blaming the slow economic recovery and last month’s extension of Bush-era tax cuts.
Daunting for US President Barack Obama, the nonpartisan agency estimates a nationwide unemployment rate of 8.2 percent on election day next year.
The budget estimates will add fuel to the already-raging debate over spending and looming legislation that would allow the government to borrow more money as the national debt nears the US$14.3 trillion cap set by law. Republicans controlling the House say there’s no way they’ll raise the limit without significant budget cuts, starting with a government funding bill that will advance next month.
The chilling figures came the day after Obama called in his State of the Union address for a five-year freeze on optional spending in domestic agency budgets passed by Congress each year.
Wednesday’s Congressional Budget Office (CBO) estimates indicate the government will have to borrow US$0.40 for every dollar it spends this fiscal year, which ends on Sept. 30. Tax revenues are projected to drop to their lowest levels since 1950, when measured against the size of the economy.
The report, full of nasty news, also says that after decades of surpluses for the federal Social Security pension program, its vast costs are no longer covered by payroll taxes.
Democrats and Republicans agree that stern anti-deficit steps are needed, but neither Obama nor his resurgent rivals in Congress are — so far — willing to put on the table cuts to popular benefit programs, such as farm subsidies and entitlement programs for the elderly, like Social Security and Medicare. The need to pass legislation to fund the government and prevent a first-ever default on US debt obligations seems sure to drive the two sides into negotiations.
Though the analysis predicts the economy will grow by 3.1 percent this year, it foresees unemployment remaining above 9 percent.
As Obama looks ahead to next year’s White House race, a predicted jobless rate of 8.2 percent does not bode well — it would be higher that the rates that contributed to losses by former presidents Jimmy Carter (7.5 percent) and George H.W. Bush (7.4 percent).
The US isn’t projected to be at full employment — considered to be a jobless rate of about 5 percent — until 2016.
The latest deficit figures are up from previous estimates because of bipartisan legislation passed last month that extended tax cuts and unemployment benefits for the long-term jobless and provided a 2 percentage point Social Security payroll tax cut this year.
That measure added almost US$400 billion to this year’s deficit, the CBO said.
The deficit is on track to beat the record of US$1.4 trillion set in 2009. The budget experts predict the deficit will drop to US$1.1 trillion next year, still very high by historical standards.
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