us budget deficit to hit $477b

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    January 27, 2004 - 8:05AM
    The US budget deficit will explode to a record of nearly half a trillion dollars in 2004, the Congressional Budget Office said providing potential dynamite in an election year.

    The CBO, a bipartisan group of experts, said the deficit would bulge from $US375 billion ($A483.22 billion) last fiscal year to an unprecedented $US477 billion ($A614.65 billion) in 2004. The fiscal year runs to September 30.

    In 2005, the shortfall would ease to $US362 billion ($A466.46 billion), the office forecast.

    President George W Bush's administration says it is determined to trim the budget shortfall as he gears up for a reelection bid in the November presidential election.

    But Bush, while calling on lawmakers to be prudent spenders, is also pressing Congress to make permanent a 10-year, $US1.7 trillion ($A2.19 trillion) list of tax cuts, some of which begin to expire this year.

    He argues the tax cuts are providing a necessary boost to the world's biggest economy.

    A black hole in the budget is looming, however, as the country struggles to pay for the health and pensions of an increasing number of elderly people, the CBO said.


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    In the decade from 2004 to 2013, the budget shortfall would expand to a total $US2.38 trillion ($A3.07 trillion) - one trillion dollars more than the CBO had predicted just five months ago, it said.

    Laws enacted since August had boosted spending by $US681 billion ($A877.52 billion), it said. Economic factors and technical adjustments accounted for the rest of the deterioration.

    Bush's Medicare legislation alone, offering a partial refund for prescription drugs, would jack up government outlays by nearly $US400 billion ($A515.43 billion) in the 2004-2013 period, the CBO said.

    US gross domestic product (GDP) should grow 4.8 per cent in calendar 2004 and 4.2 per cent in 2005, dragging down the jobless rate from 5.8 per cent this year to 5.3 per cent in 2005, it forecast.

    "Even if growth turns out to be greater than projected, however, significant long-term strains on the budget will start to intensify within the next decade as the baby-boom generation begins to retire," the CBO said.

    Spending on social security, and health care would absorb a growing proportion of the state's money.

    Under "moderate assumptions," such expenditure would rise from eight per cent of GDP in 2004 to more than 14 per cent in 2030.

    "Such increasing demands on spending will exert pressure on the budget that economic growth alone is unlikely to alleviate."
 
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