The US deficit will top $1 trillion in 2012, though it has been shrinking since 2009, according to a new report by the Congressional Budget Office (CBO).
The deficit will be down from last year’s $1.3 trillion, but is still markedly high. It is expected to fall this fiscal year, which ends in September, because of stronger tax revenue and a slowdown in government spending, Bloomberg Businessweek reported.
However, the US is expected to suffer as the government attempts to shrink the deficit: The CBO projected that unemployment would hit 8.9 percent by the end of this year and rise to 9.2 percent by the end of 2013, The Washington Post reported.
“The amount of higher revenue and lower spending that would occur under current law is really quite sharp,” CBO director Douglas Elmendorf told the Post. “We think that will be pushing down the economy as other factors are starting to push the economy up.”
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The Budget Office also predicted the country's deficit would hover in the $1 trillion range for the next several years if Bush-era tax cuts are extended. Those cuts are set to expire in December, but Obama has proposed largely extending them, except in the case of upper-income taxpayers, NBC News reported.
The CBO is a non-partisan budget analyst founded in 1974 to provide Congress with objective analyses to aid in decisions related to the federal budget, according to the organization's website.
The agency said that it is difficult to forecast the deficit beyond this year, at least in part because lawmakers have yet to resolve a number of major budgetary decisions.
“The federal budget deficit — although starting to shrink — remains very large by historical standards,” said the report. “How much and how quickly the deficit declines will depend in part on how well the economy does over the next few years."
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The report also highlighted that the deficit dilemma could be solved if the tax cuts enacted in 2001 and 2003, which were renewed in 2010 and through the end of this year, were allowed to lapse, according to NBC News. If they did, the deficit would drop to $585 billion in 2013 and to $220 billion in 2017.