The Congressional Budget Office projects that the U.S. federal budget deficit will hit an unbelievable $1.2 trillion, or 8.3 percent of the GDP for the 2009 budget year. The report entitled Budget and Economic Outlook: Fiscal Years 2009-2019 also warns that these figures do not include any future legislation such as the enactment of President-elect Barack Obama’s proposed economic stimulus package.
This report comes out on the heels of President-elect Obama warning that the country faces “trillion dollar deficits for years to come”.
The CBO report states that the budget outlook for 2009 “will be dramatically worse than it was in 2008″. In the first three months of of the 2009 fiscal year, which began on October 1, the government spent $408 billion more than it took in. The blame goes to a drop in corporate and individual tax revenues, and increased federal spending. The spending increase is largely attributed to the TARP program and the recent federal takeover of Fannie Mae and Freddie Mac.
The CBO’s baseline projections serve as a “neutral benchmark” that legislators and policy makers can use to determine the potential effects of any change in policy. The projected deficit for 2010 is about $700 billion or 4.9% of the GDP. President-elect Obama mentioned the new CBO projection at his news conference on Wednesday. “We know that our recovery and reinvestment plan will necessarily add more,” he conceded.