–Congressional Budget Office Says Report ‘Understates’ Likely Deficits
–CBO Report Assumes Current Spending, Tax Policies Remain In Place
–Projects Deficits of $3.547 Trillion Between FY12-16
–Sees Deficits of $6.971 Trillion Deficits Between FY12-21
–Sees Real GDP Growth of 3.1% in 2011, 2.8% in 2012

By John Shaw

WASHINGTON (MNI) – The Congressional Budget Office said Wednesday
that it expects the current 2011 fiscal year budget deficit to hit $1.48
trillion before beginning a steady decline over the next several years.

However, the CBO report says that its projections almost certainly
“understate” the severity of the nation’s fiscal outlook because it must
adhere to budget law that assumes that current spending and tax policies
will remain in place.

Under this assumption, most of the Bush era tax cuts would be
extended for only two more years. President Obama supports extending
many of the so-called Bush middle class tax cuts, while congressional
Republicans want all of the Bush era tax cuts to be extended.

Assuming that current budget and tax policies continue, CBO sees
budget deficits falling to $1.1 trillion in FY’12, $704 billion in
FY’13, $533 billion in FY’14, $551 billion in FY’15 and $659 billion in
FY’16.

Looking further forward, the CBO sees deficits of $617 billion in
FY’17, $610 billion in FY’18, $696 billion in FY’19, $739 billion in
FY’20, and $763 billion in FY’21.

For the FY’12 through FY’16 period, the CBO sees cumulative
deficits of $3.547 trillion and for the FY’12 through FY’21 period it
sees cumulative deficits of $6.971 trillion.

The CBO said that under this scenario, the public debt as a
percentage of GDP would grow to about 75% in 2015 and 77% in 2021.

The CBO sees real GDP growth in 2011 at 3.1% and 2.8% in 2012.

The CBS says “moderate” economic growth will create about 2.5
million jobs between 2011 and 2016.

Senate Budget Committee Chairman Kent Conrad said the CBO report is
“another wake up call to the nation.” He said long-term deficit
projections beyond the CBO’s 10 year window are even more ominous.

** Market News International Washington Bureau: (202) 371-2121 **

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