By Lori Montgomery
Washington Post Staff Writer
Wednesday, January 26, 2011; 10:28 AM
The weak economy and fresh tax cuts approved last month will help drive the federal budget deficit to $1.5 trillion this year, the biggest budget gap in history and one of the largest as a share of the economy since World War II, congressional budget analysts said Wednesday.
“Economic developments, and the government’s responses to them, have – of course – had a big impact on the budget,” the Congressional Budget Office said in its semi-annual budget outlook.
“We estimate that if current laws remain unchanged, the budget deficit this year will be close to $1.5 trillion, or 9.8 percent of [gross domestic product]. That would follow deficits of 10 percent of GDP last year and 8.9 percent in the previous year, the three largest deficits since 1945. As a result, 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.”
If current laws remain unchanged, the CBO said, budget deficits “would drop markedly over the next few years as a share of output,” averaging 3.6 percent of GDP from 2012 through 2021 and totaling nearly $7 trillion over the decade. However, that projection assumes all the Bush tax cuts will expire in 2012 and that Congress will make other changes to raise taxes — an uncertain bet.