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U.S. deficit falls slightly - but still far too high

By Catholic Online (NEWS CONSORTIUM)
January 31st, 2012
Catholic Online (www.catholic.org)

It's slightly lower than last year - but still far too high. A new budget report this week predicts the U.S. government will run a $1.1 trillion deficit in the fiscal year that ends this September. That figure is a slight dip from last year, remains perilously high by any measure. A previous estimate was for $973 billion.

LOS ANGELES, CA (Catholic Online) - The Congressional Budget Office report also says that annual U.S. deficits will remain in the $1 trillion range for the next several years, if Bush-era tax cuts slated to expire in December are extended. The CBO is a non-partisan budget analyst for Congress.

If this estimate for this year's deficit proves accurate, fiscal year 2012 will be the fourth consecutive year of federal budget deficits topping $1 trillion. The shortfall registered $1.3 trillion in fiscal 2011, up from $1.29 trillion in 2010. It reached $1.42 trillion in 2009, the highest ever.

Yet another reminder of the calamitous fiscal situation the government is in, it's commonly assumed that little will be accomplished on the deficit issue during an election year.  

The study predicts modest economic growth of two percent this year and forecasts that the unemployment rate will remain above eight percent this year.

The CBO report projects the unemployment rate will gradually decline to around 7 percent by the end of 2015, before dropping to near 5.5 percent by the end of 2017.  Inflation and interest rates should remain low during the next few years.

The new figures also prove that last summer's budget and debt pact hasn't begun to address the government's fiscal woes.  

The pact imposed $2.1 trillion in spending cuts over 10 years. The latest estimates predict $11 trillion in accumulated deficits over the 2013-2022 time frames if the Bush-era cuts in taxes on income, investments, and large estates and on families with children are renewed. Obama has proposed largely extending them, but will let them expire for upper-income taxpayers.  

The deficit requires the government to borrow 30 cents of every dollar it spends. Essentially, the deficit will reach 7 percent of the size of the economy, a slight dip from last year's 8.7 percent of gross domestic product.

The CBO report shows that the deficit dilemma would largely be solved if the tax cuts enacted in 2001 and 2003 were allowed to lapse. If this occurs, the deficit would drop to $585 billion in 2013 and to $220 billion in 2017.

Congress is expected to extend at least some of those tax cuts by the end of this year.

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