New budget estimates released today predict the government's deficit will hit almost $1.5 trillion this year, a new record. The daunting numbers mean that the government will have to borrow 40 cents for every dollar it spends. The latest figures are up from previous estimates because of bipartisan legislation passed in December that extended Bush-era tax cuts, unemployment benefits for the long-term jobless, and provided a 2% payroll tax cut this year. That measure added almost $400 billion to this year's deficit, CBO says.
The CBO analysis predicts the economy will grow by 3.1% this year, but that joblessness will remain above 9% this year. Dauntingly for President Obama, the nonpartisan agency estimates a nationwide unemployment rate of 8.2% on Election Day in 2012. "The fiscal challenge confronting us is enormous. To solve this problem, it will require real compromise and a great deal of political will," said Budget Committee Chairman Kent Conrad. "We need to have both sides, Democrats and Republicans, willing to move off their fixed positions."