Are US government spending and budget deficits now totally out of control?
''The U.S. budget deficit this year will jump nearly 40 percent over prior forecasts, mostly due to the mammoth tax-cut package brokered by President Barack Obama and lawmakers last month, the Congressional Budget Office said on Wednesday.
The CBO said the fiscal 2011 deficit will hit $1.48 trillion, up from last August's $1.07 trillion estimate, which was crafted before Bush-era tax rates were extended at a cost of $858 billion over 10 years.
'The United States faces daunting economic and budgetary challenges,' the CBO said.
The new forecast is part of a semi-annual economic review by the CBO, the nonpartisan budget analyst for Congress.''
''The severe impact of annual budget deficits was noted by CBO Director Douglas Elmendorf, who wrote in an Internet posting that 'debt held by the public will probably jump from 40 percent of GDP at the end of fiscal year 2008 to nearly 70 percent at the end of fiscal year 2011.'
The debt held by the public could keep rising, reaching 77 percent of GDP in 2021 if current spending and tax policies are unchanged, the CBO said. Analysts say the United States should strive for a more sustainable 60 percent public debt to GDP ratio.
'As disturbing as those near-term deficits are, the long-term outlook is even worse,' Senate Budget Committee Chairman Kent Conrad said.
'It is the deteriorating, long-term outlook that is the biggest threat to the country's economic security,' Conrad said. 'The fiscal challenge confronting us is enormous. To solve this problem, it will require real compromise and a great deal of political will.' ''
"The longer the necessary adjustments are delayed, the greater will be the negative consequences of the mounting debt, the more uncertain individuals and businesses will be about future government policies and the more drastic the ultimate policy changes will need to be,' Elmendorf said.''