The US budget deficit is projected to be $1.3 trillion in the year ending September 30, down from $1.4 trillion forecast in April because of curbs on federal spending, the Congressional Budget Office (CBO) said.
The nonpartisan CBO, in its semiannual look at the nation’s fiscal health, also projected the deficit for the subsequent 12- month period through September 30, 2012, at $973 billion rather than the $1.1-trillion forecast in April.
Deficits will continue to shrink as the economy improves, albeit slowly, the CBO said. The agency projected an 8.9 per cent unemployment rate in the fourth quarter and an 8.5 per cent rate in fourth quarter of 2012, when President Barack Obama will face re-election.
The CBO said unemployment will remain above eight per cent until 2014. The office also forecast a consumer price index of 1.5 per cent from 2013 through 2016.
Deficits will be much higher if Congress and the president continue the tax cuts passed under President George W Bush, scheduled to expire in 2012, and if Congress doesn’t move ahead with a planned reduction in Medicare payment rates for doctors, the CBO said.
This year’s deficit would be the third straight year of trillion-dollar shortfalls.
Earlier this month, the US avoided default when Congress voted to raise the debt ceiling. Congressional Republicans refused to increase the borrowing authority unless it was accompanied by cuts in federal spending. The legislation would make $1.2 trillion in automatic reductions unless a 12-member bipartisan congressional committee creates a deficit-cutting proposal that Congress accepts.
