Tags: Spending | Increases | Bring | Projection | $21 | Billion | Deficit

Spending Increases Bring Projection of $21 Billion Deficit

Wednesday, 23 January 2002 12:00 AM

"The economic recession and recent laws [of spending increases and tax cuts] have combined to sharply reduce the budget surpluses projected a year ago," said CBO Director Dan Crippen, testifying before the Senate Budget Committee.

Moreover, the agency anticipates the deficit to continue into the next fiscal year, though shrinking slightly, to $14 billion. Thus ends the four straight years of annual revenue surpluses since 1998. If the CBO projections do indeed become reality, it would be one of the biggest budgetary declines to be recorded, as the federal government posted $127 billion in overtaxation in 2001.

Still, the government projects a revenue surplus to return by 2004, when the economy gets back on track once again. In fact, over the next decade between 2003 and 2012, the CBO anticipates the surplus reaching $2.3 trillion, but "almost half of that total comes from the surpluses projected for 2011 and 2012 - the last two years of the projection period and thus the most uncertain. The surpluses for those years also reflect the scheduled expiration in December 2010 of the tax cuts enacted last June," Crippen said.

It is difficult to project the U.S. economy's outlook nine to 10 years hence. For instance, it was difficult in 2000 for policymakers to see that the economic engine was heading for a recession soon. It would therefore be a challenge, to say the least, for government officials to predict the state of the economy and government revenue nearly a decade from now. The CBO itself readily acknowledges that fact.

"The outlook for the budget can be best be described as a fan of probabilities around the point estimates presented as CBO's baseline. Not surprisingly, those probabilities widen as the projection period extends," Crippin said.

He also cautioned that federal spending pressures will increase with time as the U.S. population ages, nearly doubling the cost of Social Security, Medicare, and Medicaid combined by 2030. The government expects the total cost of such services to account for nearly 15 percent of the overall gross domestic product.

Nevertheless, the CBO remained upbeat about the U.S. economy's prospects, particularly in the nearer term, which has led the agency to be more bullish about the federal budget moving forward.

The CBO director said, "The most likely path for the economy is a mild recession that may already have reached its nadir."

Copyright 2002 by United Press International.

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The economic recession and recent laws [of spending increases and tax cuts] have combined to sharply reduce the budget surpluses projected a year ago, said CBO Director Dan Crippen, testifying before the Senate Budget Committee. Moreover, the agency anticipates the...
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2002-00-23
Wednesday, 23 January 2002 12:00 AM
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