This year's federal budget deficit will reach a record $422 billion, and the government is now expected to accumulate $2.3 trillion in new debt over the next 10 years, the Congressional Budget Office reported yesterday.
The expected deficit for the current fiscal year, which ends Sept. 30, is $56 billion less than the CBO predicted in March, as a recovering economy added to tax receipts. But it is $46 billion more than last year's record shortfall, with even more red ink possible, the nonpartisan agency reported: The expected total 10-year deficit would climb from $2.3 trillion to $3.6 trillion if President Bush is able to extend the tax cuts he enacted. They are currently set to expire in 2011.
The Future Deficit The Congressional Budget Office paints a potentially bleak future for the federal deficit.
"This is a fiscal situation in which we cannot rely on economic growth to cause deficits to disappear," warned CBO Director Douglas Holtz-Eakin, a former economist for the Bush White House. "The budgetary outlook will be dictated by policy choices."
About half of the projected 10-year deficit is based on an assumption that conflicts in Iraq and Afghanistan will continue. The CBO policy requires that deficit projections be based on current conditions.
The budget office expects that the total federal debt held by the public -- the amount borrowed through the sale of Treasury bonds to finance overspending -- will balloon 58 percent over the next decade, from $4.3 trillion this year to nearly $6.8 trillion in 2014.
The CBO's findings may refocus some political attention on the fiscal health of a federal government that, between recession, war and tax cuts, has swung from record surpluses to record deficits since Bush took office.
Both political parties seized on the CBO's findings, with Republicans stressing the $56 billion improvement over the CBO's March estimate, and Democrats focusing on the longer-term forecast.
The new estimate is "a sign of the economic growth that is a result of President Bush's leadership on tax relief," said Tim Adams, policy director for the Bush campaign.
Democratic presidential nominee John F. Kerry retorted, "Only George W. Bush could celebrate over a record budget deficit of $422 billion."
Budget analysts said the report should not be seen as good news to either side inasmuch as neither has a detailed plan to tackle the deficit.