CBO Projects Record Federal Deficit

The Congressional Budget Office is out with new projections. It forecasts modest but steady growth and a gradual return to more normal unemployment levels in five years. As for deficits and the debt, the CBO projects a $1.5 trillion deficit this year — the largest ever.

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STEVE INSKEEP, host:

The United States is about to do a lot more for this year. A new estimate from the nonpartisan Congressional Budget Office predicts that the U.S. budget deficit is going to hit a new record this year. The report also says the economy will pick up slowly.

NPR's David Welna reports.

DAVID WELNA: The CBO says unemployment levels will dip to 9.2 percent by the end of this year, and a percentage point lower around election time next year. Unemployment is not expected to decline to its historic level of about five percent until 2016.

The CBO also predicts this year's budget deficit will reach a record one-and-a-half trillion dollars. That's too much for Maine Republican Senator Olympia Snowe.

Senator OLYMPIA SNOWE (Republican, Maine): So it's clear to me that we have reached that tipping point. And if we continue on this current trajectory of spending as indicated by CBO, spending will represent 45 percent of the gross domestic product, and our national debt, as a part of the GDP, will be 90 percent in just nine years.

WELNA: Congressional Republicans say the solution is to slash spending. But Senate Budget Committee Chairman Kent Conrad warns that doing so could plunge a fragile recovery into a double-dip recession.

Senator KENT CONRAD (Democrat, North Dakota): We need another 18 months to two years before we start imposing the really tough medicine that is going to have to be imposed if we're going to deal with this long-term debt threat.

GONYEA: Conrad said Congress and the White House need to agree on what that medicine will be soon.

David Welna, NPR News, the Capitol.

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