CBO increases deficit estimate for 2009
U.S. budget deficit upped from $438 billion to $1.2 trillion
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PrintThe Congressional Budget Office (CBO) increased its estimate of the deficit for 2009 by $748 billion. A major reason for the deficit increase is the projection of lower revenues for 2009. The lower revenues estimate comes from the CBO's expectation of a longer and deeper recession.
The CBO anticipates that this recession will probably be the longest and deepest since World War II. And because of that, expects the Gross Domestic Product (GDP) to fall by 2.2 percent in 2009. The CBO is forecasting a slow recovery of 1.5 percent for 2010. CBO anticipates the deficit to be around $1.2 trillion, or 8.3 percent of GDP in 2009. The deficit falls to 4.9 percent of GDP for 2010. Both these estimates are high compared to historical standards.
The CBO's earlier estimate in September 2008 was a deficit of $438 billion for 2009. The budget deficit for 2008 was 3.2 percent of GDP or $455 billion. In 2007 it was $161 billion.
CBO expects federal revenues to decline by $166 billion, or 6.6 percent, from the amount in 2008. The recession and sharp drops in the value of publicly traded stock are expected to lead to sizable declines in revenues from individual and corporate income taxes. Revenues dropped in 2008, compared to 2007 as well. Some of the major items of spending include $662 billion for social security, $714 billion for medicare and medicaid and $644 billion for defense.
The national debt held by the public is expected to increase to $7.2 trillion in 2009 from $5.8 trillion in 2008.
