With the sluggish economy holding down revenues and the federal government still spending lavishly, the national deficit will hit $1.3 trillion this year — second only to last year's record, Congress's chief scorekeeper said Thursday.
Adding to the grim news, the Congressional Budget Office said the ongoing recovery from the recession has been "anemic." The CBO projects that the economy will only grow at 2 percent over the next year, and unemployment will average 9 percent next year and won't fall to 5 percent until 2014.
"Growth in the nation's output since mid-2009 has been anemic in comparison with previous recoveries that followed a deep recession, and the unemployment rate has remained quite high," the nonpartisan agency said.
In just the last six months, Congress has added another $29 billion to this year's deficit, and $404 billion over the next 10 years, CBO analysts said. The 2010 fiscal year ends Sept. 30.
Still, the CBO report projects that budget deficit will drop over the long term as the economy inevitably recovers and as stimulus spending expires. Indeed, revenues will grow slightly this year for the first time in three years, at a rate of 2 percent, and spending, which had been fueled by the $862 billion stimulus law and the Wall Street bailout, will drop by 1 percent.
There was good news for both Democrats, who want to continue stimulus spending, and Republicans, who want to keep in place the Bush-era tax cuts. The CBO update said that both cutting back on the spending or allowing the tax cuts to lapse will actually keep the economy down.
"Both the waning of fiscal stimulus and the scheduled tax increases will temporarily restrain growth, especially in 2011," the scorekeepers said.
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