Budget Deficit Is Expected to Hit $1.5 Trillion

By COREY BOLES
WSJ

WASHINGTON—The Congressional Budget Office painted a grim picture of the federal government's finances Wednesday, saying the budget deficit would jump to nearly $1.5 trillion in the current fiscal year, largely because of a tax-cut extension enacted last year.

In its twice-annual forecast of the U.S. economy, the nonpartisan agency said the gross domestic product would grow 3.1% in 2011 but the jobless rate would remain stubbornly high for the foreseeable future. The new forecast compares with a $1.3 trillion deficit in fiscal 2010.

The CBO said the deficit, as a share of U.S. gross domestic product, would jump to 9.8% in fiscal 2011 from 8.9% in fiscal 2010. That would make the deficit the highest since the 10% mark recorded in fiscal 2009, which was the worst in 65 years. The agency said the deficit as a proportion of GDP would then decline to 7% in fiscal 2012.

The agency said the current unemployment rate of 9.4% would fall only marginally to 9.2% by the fourth quarter of 2011 and drop to 8.2% by the end of 2012. It won't revert to its "natural rate" of 5.3% until 2016, the CBO said.

(More here.)

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