Aug 25, 2011 12:48 PM GMT
The federal budget deficit will continue at historically high levels, hitting $1.3 trillion in fiscal 2011, congressional budget analysts said Wednesday. But it will ebb substantially over the next decade — if the Bush-era tax cuts and other measures are allowed to expire as scheduled, the report said.
The nonpartisan Congressional Budget Office says that revenue, coupled with the debt-reduction deal signed into law this month by President Obama, would cut projected deficits by $3.3 trillion, or nearly half, over the next 10 years.
But that reduction will be realized only if lawmakers allow a series of tax cuts and other temporary revenue measures to expire. The prospect of that happening is considered dicey by many analysts, given the divisive political environment in Washington.
The laws in question include the 2001 George W. Bush tax cuts; a measure aimed at limiting the bite of the alternative minimum tax; the payroll tax reduction now in effect; cuts in Medicare payment rates to doctors; and federal emergency unemployment benefits.
If those measures are extended — as they have been on multiple occasions — the average federal deficits from 2012 to 2021 would account for 4.3 percent of gross domestic product, compared with the 1.8 percent contemplated in the CBO’s projections.
Even if those laws all are allowed to expire, the CBO projected that the federal government will accumulate $3.47 trillion in new debt during the next decade. That increase is projected as the nation struggles to emerge from the recession that stunted economic growth and has thrown millions of Americans out of work.