WASHINGTON – The deficit for the current budget year will jump to about $250 billion under Congressional Budget Office figures released Wednesday, as a weaker economy and lower corporate profits weigh on the government’s fiscal ledger.
And that figure does not reflect more than $100 billion in red ink from an economic stimulus measure in the works.
“After three years of declining budget deficits, a slowing economy this year will contribute to an increase in the deficit,” the CBO report said.
The figure greatly exceeds the $163 billion in red ink registered last year. Adding likely but still unapproved outlays for the wars in Iraq and Afghanistan brings its “baseline” deficit estimate of $219 billion to about $250 billion, the nonpartisan CBO said.
House Budget Committee Chairman John Spratt Jr., D-S.C., said the 2008 deficit might reach $379 billion once the costs of an upcoming economic stimulus measure under negotiation between the Bush administration and Congress are factored in.
Unlike an increasing number of economists, the CBO does not forecast a recession this year. It instead forecasts a growth rate of 1.7 percent, down from 2.2 percent real growth in the gross domestic product (GDP) last year.
“Although recent data suggest that the probability of a recession in 2008 has increased, CBO does not expect the slowdown in economic growth to be large enough to register as a recession,” the CBO said. The CBO economic forecast was completed last month, before a recent spike in unemployment and the release of disappointing holiday retail sales figures.
“A number of ominous economic signs have emerged since CBO finalized last month the forecast underlying today’s report,” Spratt said. “Today’s new economic forecast thus adds to the growing evidence that the economy has weakened and that policymakers in Washington must take action.”