The US budget deficit will explode to a record of nearly half a trillion dollars this year, the Congressional Budget Office said Monday, providing potential dynamite in an election year.
The CBO, a bipartisan group of experts, said the deficit would bulge from US$375 billion last fiscal year to an unprecedented US$477 billion this year. The fiscal year runs to Sept. 30.
Next year, the shortfall would ease to US$362 billion, the office forecast.
US President George W. Bush's administration says he is determined to trim the budget shortfall as he gears up for a re-election bid in the November presidential election.
But Bush, while calling on lawmakers to be prudent spenders, is also pressing Congress to make permanent a 10-year, US$1.7 trillion list of tax cuts, some of which begin to expire this year.
He argues the tax cuts are providing a necessary boost to the world's biggest economy.
A black hole in the budget is looming, however, as the country struggles to pay for the health and pensions of an increasing number of elderly people, the CBO said.
In the decade from 2004 to 2013, the budget shortfall would expand to a total US$2.38 trillion -- US$1 trillion more than the CBO had predicted just five months ago, it said.
Laws enacted since August had boosted spending by US$681 billion, it said. Economic factors and technical adjustments accounted for the rest of the deterioration.
Bush's Medicare legislation alone, offering a partial refund for prescription drugs, would jack up government outlays by nearly US$400 billion in the 2004-2013 period, the CBO said.
US GDP should grow 4.8 percent in calendar 2004 and 4.2 percent next year, dragging down the jobless rate from 5.8 percent this year to 5.3 percent next year, it forecast.
"Even if growth turns out to be greater than projected, however, significant long-term strains on the budget will start to intensify within the next decade as the baby-boom generation begins to retire," the CBO said.
Spending on social security and health care would absorb a growing proportion of the state's money.
Under "moderate assumptions," such expenditure would rise from 8 percent of GDP this year to more than 14 percent in 2030.
"Such increasing demands on spending will exert pressure on the budget that economic growth alone is unlikely to alleviate," the CBO said.
By law, the budget projections are based on the assumption that no new legislation or policy will be enacted.
Treasury Secretary John Snow said the deficit had grown too big but Bush was serious about slicing it in half.
"With the recession, 9/11 and the resulting war on terror, these deficits are certainly understandable and they are too large and they are not welcome and they will not last," Snow said in a prepared speech.
"Make no mistake; President Bush is serious about the deficit," he said in the speech, given via satellite to an economic conference in London before the CBO forecasts were released.
The deficit, estimated by the CBO at 4.2 percent of annual GDP this year, was "not historically out of range" when compared to the 6 percent level reached in the 1980s, Snow said.
In a book published this month, former US treasury secretary Paul O'Neill quoted Vice President Dick Cheney as saying: "Reagan proved deficits don't matter."
Cheney defended himself at a meeting of the World Economic Forum in Davos, Switzerland last week. "I believe deficits do matter but I'm also a great believer in the policy we're following," he said.
Right-wing political scientist Laura Fernandez on Sunday won Costa Rica’s presidential election by a landslide, after promising to crack down on rising violence linked to the cocaine trade. Fernandez’s nearest rival, economist Alvaro Ramos, conceded defeat as results showed the ruling party far exceeding the threshold of 40 percent needed to avoid a runoff. With 94 percent of polling stations counted, the political heir of outgoing Costa Rican President Rodrigo Chaves had captured 48.3 percent of the vote compared with Ramos’ 33.4 percent, the Supreme Electoral Tribunal said. As soon as the first results were announced, members of Fernandez’s Sovereign People’s Party
EMERGING FIELDS: The Chinese president said that the two countries would explore cooperation in green technology, the digital economy and artificial intelligence Chinese President Xi Jinping (習近平) yesterday called for an “equal and orderly multipolar world” in the face of “unilateral bullying,” in an apparent jab at the US. Xi was speaking during talks in Beijing with Uruguayan President Yamandu Orsi, the first South American leader to visit China since US special forces captured then-Venezuelan president Nicolas Maduro last month — an operation that Beijing condemned as a violation of sovereignty. Orsi follows a slew of leaders to have visited China seeking to boost ties with the world’s second-largest economy to hedge against US President Donald Trump’s increasingly unpredictable administration. “The international situation is fraught
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) plans to make advanced 3-nanometer chips in Japan, stepping up its semiconductor manufacturing roadmap in the country in a triumph for Japanese Prime Minister Sanae Takaichi’s technology ambitions. TSMC is to adopt cutting-edge technology for its second wafer fab in Kumamoto, company chairman C.C. Wei (魏哲家) said yesterday. That is an upgrade from an original blueprint to produce 7-nanometer chips by late next year, people familiar with the matter said. TSMC began mass production at its first plant in Japan’s Kumamoto in late 2024. Its second fab, which is still under construction, was originally focused on
GROWING AMBITIONS: The scale and tempo of the operations show that the Strait has become the core theater for China to expand its security interests, the report said Chinese military aircraft incursions around Taiwan have surged nearly 15-fold over the past five years, according to a report released yesterday by the Democratic Progressive Party’s (DPP) Department of China Affairs. Sorties in the Taiwan Strait were previously irregular, totaling 380 in 2020, but have since evolved into routine operations, the report showed. “This demonstrates that the Taiwan Strait has become both the starting point and testing ground for Beijing’s expansionist ambitions,” it said. Driven by military expansionism, China is systematically pursuing actions aimed at altering the regional “status quo,” the department said, adding that Taiwan represents the most critical link in China’s
RSS