–US CBO Sees Deficits Falling To $$1.06T in FY’11, $665 in FY’12
–CBO Report Based on Current Policies; Assumes 01 & 03 Tax Cuts End
–CBO” Sees Deficits Of $525B in FY’13, $438B in FY’14, $507 In FY’15
–US CBO: U.S. Econ To Grow At 2.8% in 2010 and 2% in 2011

By John Shaw

WASHINGTON (MNI) – In a report that offers only a partial glimpse
of the near-term fiscal outlook, the Congressional Budget Office said
Thursday that the U.S. budget deficit for the current 2010 fiscal year
will total $1.342 trillion, down slightly from the record deficits of
FY’09.

But the CBO noted that a budget deficit of $1.342 trillion still
represents 9.1% of GDP.

In the report, the CBO’s said the American economy would grow by
2.8.% in 2010 (fourth quarter to fourth quarter) and then grow by 2.0%
in 2011.

Under budget law, the CBO must make its baseline estimates by
assuming that current tax and spending laws are unchanged.

In this instance, it means assuming that a raft of tax cuts that
are scheduled to expire after 2010 will indeed expire. Many in Congress
from both parties support renewing at least some of these tax cuts.

The CBO report will also assume that the alternative minimum tax
will generate more than $1 trillion over the next decade, when political
leaders from both parties call for repealing or scaling back the AMT.

The CBO estimates provide only a rough benchmark of the nation’s
fiscal problems because they assume that current spending and tax
policies will continue unchanged.

The CBO sees deficits of $1.066 trillion in FY’11, $665 billion in
FY’12, $525 billion in FY’13, $438 billion in FY’14 and $507 billion in
FY’15.

Looking further forward, the CBO sees deficits of $585 billion in
FY’16, $579 billion in FY’17, $562 billion in FY’18, $634 billion in
FY’19, and $685 billion in FY’20.

For the FY’11 through FY’15 period, the CBO sees cumulative
deficits of $3.202 trillion and $6.246 trillion for the FY’11 through
FY’20 period.

The CBO projects the public debt-to-GDP level to be 61.6% at the
end of 2010 and then rise to almost 70% in 2020. In 2001, debt was only
33% of GDP.

Senate Budget Committee Chairman Kent Conrad said in a statement
that the report shows grim deficit numbers, but added that his “real
concern” is longer-term deficit projections.

Sen.Judd Gregg, the ranking Republican on the Budget Committee,
called the report dismal and alarming. “The country is headed for fiscal
calamity” unless changes in fiscal policy are made, Gregg said.

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

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