The Congressional Budget Office (CBO) yesterday released its updated “Budget and Economic Outlook: Fiscal Years 2012 to 2022.” According to CBO:
“For fiscal year 2012 (which ends on September 30), the federal budget deficit will total $1.1 trillion, CBO estimates, marking the fourth year in a row with a deficit of more than $1 trillion. That projection is down slightly from the $1.2 trillion deficit that CBO projected in March. At 7.3 percent of gross domestic product (GDP), this year’s deficit will be three-quarters as large as the deficit in 2009 when measured relative to the size of the economy. Federal debt held by the public will reach 73 percent of GDP by the end of this fiscal year—the highest level since 1950 and about twice the share that it measured at the end of 2007, before the financial crisis and recent recession.”
In addition, CBO projects that the nation will enter into a deep recession in 2013 if Congress fails to address the sequester and the expiring Bush tax cuts. CBO also suggests that going over the “fiscal cliff” would disrupt economic progress, reduce real GDP by 0.5 percent, and push unemployment over 9.1 percent.
The outlook is darker than the forecast the agency released in January, when CBO predicted that the fiscal cliff would trigger a modest recession in the first half of 2013, followed by a quick recovery. The expiring “extenders” package for unemployment benefits and payroll tax holiday, coupled with a weaker economy has made the 2013 outlook more dire. Reactions and analyses of CBO’s report are available from the Center for Budget and Policy Priorities, and the Bipartisan Policy Center.