The US could slide towards record deficits unless tax cuts are reversed or public spending sharply curbed, according to analysis by the US Congressional Budget Office (CBO).
The non-partisan CBO, which produces Congress's official estimates of probable future deficits, confirmed predictions that the federal deficit would reach $401 billion (€367.8 billion), this fiscal year.
Its "baseline" forecast - which assumes discretionary government spending grows only at the rate of inflation - shows the deficit rising to $480 billion or more than 4 per cent of gross domestic product next year before moving to surplus over the next 10 years.
Near-term deficits are sharply higher than CBO's March estimates, largely due to tax cuts pushed through by the White House. The projections were similar to those released by the administration last month.
Alternative scenarios produced by the CBO showed large deficits could continue over the next decade, given certain tax and spending measures. In particular, extending tax cuts due to expire over the next 10 years and expanding Medicare, the federal health plan for the elderly, to include a prescription drug benefit would more than double the projected deficit.
A more realistic growth pattern for public spending - keeping constant as a share of the economy - would mean the deficit would still be more than $400 billion by 2013. Conversely, freezing discretionary spending at its current level - an unlikely outcome - would almost eliminate the 10-year deficit. - (Financial Times Service)
