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Economic conditions

US Budget Deficit to Surge by Almost $1 Trillion Over Next Decade

Strategic Insights

— 1 min read

The new official congressional forecast indicates that the US budget deficit is likely to be almost $1 trillion larger over the next decade than previously projected. The Congressional Budget Office (CBO) predicts that deficits from 2005 to 2014 will reach almost $1.9 trillion, a staggering $986 billion more than the previous forecast just six months ago. This dramatic deterioration in the US budget position is largely attributed to legislation enacted by Congress last year, including a $400 billion plan to add a prescription drug benefit to Medicare.

Key Takeaways:

  • The CBO's new forecast predicts that the US budget deficit will be almost $1 trillion larger over the next decade, reaching almost $1.9 trillion.
  • The increase in the deficit is largely due to legislation enacted by Congress last year, including a $400 billion plan to add a prescription drug benefit to Medicare.
  • Discretionary spending is assumed to rise by little more than the rate of inflation, falling as a share of gross domestic product.
  • Economists are skeptical that the administration will be able to keep discretionary spending increases under control over the coming years.
  • The fiscal outlook could be even more gloomy than the CBO's headline forecast, with other administration pledges likely to increase the deficit.
  • President George W. Bush's pledge to halve the deficit over the next five years appears unlikely to be met.
  • The deficit's record-breaking proportions are alarming, with Democrats arguing that it poses significant dangers to the economy.

Statistics:

  • The CBO's new forecast predicts a budget deficit of almost $1.9 trillion from 2005 to 2014.
  • The deficit is expected to be $986 billion more than the previous forecast just six months ago.
  • Discretionary spending is assumed to rise by 2.4% over the next decade.
  • Spending on the Medicare prescription drug benefit is expected to exceed $400 billion in the next decade.
  • Inflation is expected to erode federal revenues by 1.3% over the next decade.

Sources:

  • Congressional Budget Office (2003). "Budget Projections for the Next Decade."
  • John Spratt (2003). "Democrats Question Bush's Fiscal Restraint."

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