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United States News Title: U.S. Deficit To Top $1 Trillion, Smallest Since ’09 The federal budget deficit will top $1 trillion for a fourth straight year, congressional budget analysts said Tuesday, but is likely to be the smallest since the Great Recession began taking a toll on the budget in 2009. The nonpartisan Congressional Budget Office projected that the gap between government spending and tax collections would continue to fall, dropping sharply in 2013 and through the decade if policymakers follow through with major changes in both tax policy and government spending now on the books. The $1.1 trillion deficit is the smallest deficit figure — both in nominal terms and as a percentage of the economy — since the Great Recession. The CBO said that allowing the George W. Bush tax cuts to expire on schedule in January and making deep cuts to the Pentagon and other agency budgets would shrink future deficits and begin to tame the national debt. Still, the nation would pay an economic price for such austerity measures, the CBO said. Raising taxes and cutting government spending would slow economic growth and increase unemployment. The CBO projected that the jobless rate would hit 8.9 percent by the end of this year and rise to 9.2 percent by the end of 2013. CBO director Douglas Elmendorf said the changes would make “a very large difference” in what the government takes in and what it spends in the next fiscal year, which would amount to nearly $400 billion in 2013 alone. “So the amount of higher revenue and lower spending that would occur under current law is really quite sharp,” Elmendorf said. “We think that will be pushing down the economy as other factors are starting to push the economy up.” If policymakers instead choose to short-circuit those changes, the nation’s financial health could suffer, the CBO said. Extending the Bush tax cuts would reduce revenues by $5.4 trillion over the next decade. Extending other temporary tax policies, such as the tax break for corporate research and development, would add another $1 trillion to deficits, as would a decision to forego the agency spending cuts agreed to during the battle over the debt-limit last summer. All told, unless policymakers are willing to ask voters to make significant sacrifices, they risk adding another $11 trillion to the $15.2 trillion national debt through 2022, according to CBO figures. The Congressional Budget Office takes stock of the federal budget at least three times each year: in January, upon receipt of the president’s budget and again in August. The agency’s projection for the 2012 deficit has increased slightly since August, primarily because of corporate tax receipts and the extension of the Social Security payroll tax holiday through the end of this month. Lawmakers in both parties want to extend the tax break, which reduces the payroll tax rate from 6.2 percent to 4.2 percent, through the rest of this year. If Congress cannot agree on spending cuts or tax increases to replace the lost revenue, the new extension would add another $75 billion to the 2012 deficit, the CBO said. Even then, the 2012 budget gap would mark an improvement over the past three years, when the deficit topped out at $1.4 trillion. The budget gap has fallen steadily as a share of the slowly growing economy — dropping from 10 percent in 2009 to a projected 7 percent this year — as individual tax collections have begun to recover and spending on the social safety net has shrunk. The accumulation of large deficits has required the nation to borrow heavily, and the portion of the debt held by outside investors has doubled since 2007. The CBO projects that it will rise to more than 72 percent of the economy by the end of this year — the highest level since World War II — and then begin to drift downward if Congress and the next president let the Bush tax cuts expire and maintain other austerity policies now scheduled to take effect. Without those changes, however, the national debt would continue to soar, the CBO said, with the portion held by outside investors rising to 94 percent of the economy by 2022. “How much or how quickly the deficit declines will depend in part on how well the economy does over the next few years,” the CBO report said. “Probably more critical, though, will be the fiscal policy choices made by lawmakers as they face the substantial changes to tax and spending policies that are slated to take effect within the next year.” In a statement after the report was released, Senate Budget Committee Chairman Kent Conrad (D-N.D.) called on lawmakers to work together to support the economic recovery. “We will not solve this problem unless both sides, Democrats and Republicans, are willing to move off their fixed positions and find common ground,” he said. “Republicans must be willing to put revenue on the table and accept a tax code where everyone, including the wealthiest, pays their fair share.” House Budget Committee chairman Paul Ryan (R-Wis.) echoed Conrad and said that he is committed to “building a bipartisan coalition for a principled reform agenda.” “The CBO’s latest alarm bell couldn’t be more ominous,” Ryan said in a statement. “For years, politicians from both political parties have failed to be honest with the American people about the size and scope of the debt threat. The CBO’s report today confirms that it is past time for serious leaders to put aside politics and start forging solutions.”
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