United States Congressional Budget Office (CBO) estimates for fiscal year 2011 budget deficit will reach U.S. $ 1.066 trillion, equivalent to 7% of gross domestic product (GDP).
For the fiscal year ended September 30, 2010, the budget deficit was estimated to exceed U.S. $ 1.3 trillion, equivalent to 9.1% of GDP. Deficit in 2010 will become the second largest in the last 65 years, after last year touched 9.9% of GDP.
“We estimate that the cumulative deficit for a decade ahead will reach U.S. $ 6.27 trillion, up from the March forecast of U.S. $ 5.99 trillion,” the CBO wrote in his official website yesterday.
CBO estimates made no account of changes in tax receipts or government spending that has not been approved by Congress. CBO uses the assumption of tax reductions in this decade and will expire at the end of 2010.
Another assumption used is that no new regulation that maintains the alternative tax policy (AMT). Moreover, the effects of fiscal stimulus enacted last two years will be exhausted and the real annual inflation rate remained constant.
With a number of assumptions, the budget deficit will decrease significantly during the two years ahead until you reach the level of 4.2% of GDP in 2012. The economy is expected to grow by only 2% from quarter to quarter IV/2011 IV/2010.
Meanwhile, the unemployment rate will not decrease until the end of the range of 5% until 2014. In 2011, unemployment is projected to reach the level of 9%, and 8.1% in 2012 and 6.6% in 2013.
According to CBO Director Doug Elmendorf, given projections have not changed significantly since March. He insisted the U.S. economy is still struggling to recover from the recession and the impact of the bailout and other spending that is designed to spur growth.
“The United States facing budget problems are acute and serious economic problems as well,” he said as quoted by Bloomberg.
Vincent Reinhart, American Enterprise Institute analyst who is also former director of the Federal Reserve’s monetary affairs, assessing deficit and debt problems which will make it very big government and Congress to disburse the second phase of a stimulus package.
“If fiscal stimulus is not launched the second phase, so stay depends on the monetary stimulus. It’s just that, with interest rates approaching 0%, meaning that there needs to be quantitatively loosening of monetary policy in other forms, “he explained.