Projected US budget deficits threaten to curtail growth: CBO
The US budget deficit is expected to shrink this year but projected shortfalls over the next decade may jump by six trillion dollars and curtail growth, estimates by Congress showed Thursday.
The Congressional Budget Office estimated a federal budget deficit of 1.342 trillion dollars for fiscal 2010 that ends September 30 -- 71 billion dollars below last year's total of 1.413 trillion dollars.
It was also lower than the latest White House estimate of a 1.471-trillion-dollar shortfall.
But projected deficits totalling 6.2 trillion dollars for 10 years starting in 2011 will raise federal debt held by the public to more than 69 percent of gross domestic product by 2020, the CBO warned in a report.
It is almost double the 36 percent of GDP at the end of 2007, it said.
"Continued large deficits and the resulting increases in federal debt over time would reduce long-term economic growth," warned CBO Director Douglas Elmendorf.
"Putting the nation on a sustainable fiscal course will require policymakers to restrain the growth of spending substantially, raise revenues significantly above their average percentage of GDP of the past 40 years, or adopt some combination of those approaches," he said.
The massive budget deficit and burgeoning debt are expected to be key issues in upcoming mid-term elections in November and President Barack Obama has promised to confront the tough spending choices he said Washington has dodged for years.
As was the case last year, this year's deficit was attributed mostly to a combination of weak revenues and elevated spending linked to hauling the economy out of a brutal recession.
The CBO estimated that the 2011 deficit will fall to 1.0 trillion dollars and taper off yearly to 2020.
It said the latest 2010 deficit projection was 27 billion dollars below the shortfall that the CBO projected in March 2010, when it issued its previous estimate.
Relative to the size of the US economy, this year's deficit is expected to be the second biggest shortfall in the past 65 years, the CBO said in its annual summer update of the budget and economic outlook.
At 9.1 percent of gross domestic product (GDP), a broad measure of a country's output, the deficit is exceeded only by last year's deficit of 9.9 percent of GDP.