The US budget deficit this year will be close to 40% above forecasts, due to the mammoth tax-cut package brokered by President Barack Obama and lawmakers last month, the Congressional Budget Office said Wednesday.
The CBO said the fiscal Y 2011 deficit will hit US$1.48T, up from last August's US$1.07Testimate, which was crafted before Bush-era tax rates were extended at a cost of US$858B over 10 yrs.
The CBO estimates that the act will increase the deficit by US$390B in Y 2011, by US$407B in Y 2012 and by US$120B in Y 2013, according to the report.
While a deficit of nearly US$1.5T in the F-Y that ends September 30 will be an all-time record in USD terms, as a percentage of the overall economy it would be slightly below the US$1.41T deficit in F-Y 2009.
The US$1.48T deficit, CBO said, would be about 9.8% of GDP, higher than the 8.9% of GDP in Y 2010, but below the 10% in Y 2009.
The new forecast is part of a semi-annual economic review by the CBO, the non-partisan budget analyst for Congress.
The latest CBO estimates could exacerbate a deeply partisan debate in Congress and with Obama over the best way to tackle the US$14T federal debt.
Some Republicans look at the CBO report as more evidence of the need to cut federal spending.-Paul A. Ebeling, Jnr. www.livetradingnews.com