Belfast Telegraph

US deficit will rocket to $1.5trn, say experts

Us deficit spending will surge to a record $1.5trn (£941bn) this year, congressional budget experts said, blaming the slow economic recovery and last month's extension of Bush-era tax cuts.

Equally daunting for President Barack Obama, the non-partisan agency also estimates a nationwide unemployment rate of 8.2% on election day in 2012.

The budget estimates will add fuel to the debate over spending and looming legislation that will allow the Government to borrow more as the national debt nears the $14.3trn (£8.9trn) cap set by law.

Republicans controlling the House of Representatives say there is no way they will raise the limit without budget cuts, starting with a government funding bill that will advance next month.

The chilling figures came the day after Mr Obama called in his State of the Union address for a five-year freeze on optional spending in domestic agency budgets passed by Congress each year.

The Congressional Budget Office estimates indicate the Government will have to borrow 40 cents for every dollar it spends this fiscal year, which ends on September 30. Tax revenues are projected to drop to their lowest levels since 1950 when measured against the size of the economy.

The report, which makes grim reading, also says that after decades of surpluses for the federal social security pension programme, its vast costs are no longer being covered by payroll taxes.

Democrats and Republicans agree that stern anti-deficit steps are needed, but neither Mr Obama nor his resurgent rivals in Congress are - so far - willing to put on the table cuts to popular benefit programmes such as farm subsidies and entitlement programmes for the elderly like social security and Medicare.

The need to pass legislation to fund the Government and prevent a first-ever default on US debt obligations seems sure to drive the two sides into negotiations.

Though the analysis predicts the economy will grow by 3.1% this year, it foresees unemployment remaining above 9%.

As Mr Obama looks ahead to next year's White House race, a predicted jobless rate of 8.2% does not bode well: it would be higher than the rates that contributed to losses by presidents Jimmy Carter (7.5%) and George Bush Snr (7.4%).