CBO Sees FY 2013 Deficit of $845B, FY 2014 $616B

WASHINGTON — The Congressional Budget Office reported Tuesday that if current spending and tax laws continue the U.S. will leave the land of $1 trillion annual budget deficits, with deficits dropping to $845 billion in fiscal year 2013.

The CBO report shows budget deficits falling further to $616 billion in FY 2014, $430 billion in FY 2015, and $476 billion in FY 2016.

Beyond that, the deficits are expected to rebound in the fiscal years that follow: to $535 billion in 2017, $605 billion in 2018, $710 billion in 2019, $798 billion in 2020, $854 billion in 2021, $957 billion in 2022 and $978 billion in 2023.

For the five-year period, FY 2014-2018, the CBO sees cumulative deficits of $2.661 trillion. For the 10-year period, extending from FY 2014-2023, the CBO sees cumulative deficits of $6.958 trillion.

The report notes that the U.S. public debt will reach 76% of GDP by the end of 2013 and then hit 78% of GDP at the end of 2014.

The CBO emphasizes that its current estimates are based on the assumption that current policies are implemented. This includes an assumption that the full $1.2 trillion in across-the-board spending cuts will be implemented.

Economic growth "will remain slow this year," the CBO projects, but then should pick up next year. But the unemployment rate is expected to remain above 7.5% through next year.

Real GDP is projected to grow by 1.4% this year but then increase by 3.4% in 2014 and an average of 3.6% a year from 2015 through 2018, the CBO said.

And "the effects of the housing and financial crisis will continue to fade and that an upswing in housing construction (though from a very low level), rising real estate and stock prices and increased availability of credit will help to spur a virtuous cycle of faster growth in employment, income, consumer spending, and business investment over the next few years," the report said.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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