The U.S. budget deficit will shrink this year to $1.1 trillion, theCongressional Budget Office said today in a report sure to inflame the election-year debate over the government shortfall.
The deficit, which would be down from last year’s $1.3 trillion, will fall because of strengthening tax revenue and a sharp slowdown ingovernment spending, the CBO said. Outlays this year will climb by 0.1 percent, or $3 billion, it said, while tax revenue will be up by 10 percent. It would be the fourth consecutive year the government runs a trillion-dollar deficit.
The estimate doesn’t include the cost of extending a payroll tax break and expanded unemployment benefits, both set to expire Feb. 29. If lawmakers don’t offset the cost of an extension, that would push this year’s deficit to $1.2 trillion, the report said.
The budget office said it expects the economy to expand this year by 2 percent while the unemployment rate will probably climb to 8.9 percent from the current 8.5 percent.
It is difficult to forecast the deficit beyond this year, the agency said, in part because lawmakers have left a number of major budget decisions unresolved.
“The federal budget deficit — although starting to shrink — remains very large by historical standards,” the report said. “How much and how quickly the deficit declines will depend in part on how well the economy does over the next few years.
