Finance

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Eric Risberg/AP
U.S. Treasurer Anna Escobedo Cabral thanks workers at the San Francisco Regional
Financial Center for their efforts in the printing of stimulus checks. (AP)

Budget Office Says U.S. Deficit Will Hit $407 Billion

September 09, 2008 02:50 PM
by Anne Szustek
A report released Tuesday estimates the federal budget deficit will rise from $246 billion to $407 billion by the end of the year, due in part to ‘stimulus’ checks and bank bailouts.
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The federal budget deficit, up from $161 billion last year, equates to roughly 3 percent of gross domestic product, and is being deepened by “a substantial increase in spending and a halt in the growth of tax revenues,” CNNMoney quotes the CBO report.

One substantial cost for the government were the FDIC (Federal Deposit Insurance Corporation) payouts to depositors for 11 banks that failed during the 2007-08 fiscal year, which ends Sept. 30.

If current spending policies are kept in place, the CBO projects the deficit to exceed $400 billion next year as well. Bloomberg is reporting that the CBO’s estimate is actually gloomier—as high as $438 billion by the end of this fiscal year.

And the CBO’s estimate does not even take into account the Treasury’s takeover of Fannie Mae and Freddie Mac, which could cost as much as $200 billion, nor the possibility of extending tax cuts made in 2001 and 2003 into account. Both major-party presidential candidates have supported keeping the tax cuts in place.

The CBO calculated earlier this year that the government would have a $300 billion budget surplus by 2018. But Tuesday’s report revises that projection for the next decade to a deficit of $2.3 trillion, due in part to fiscal policy as well as increased spending for military operations in Iraq and Afghanistan.
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