U.S. Deficit Plunges Toward Record $1.47 Trillion

A record $1.47 trillion budget deficit is set to be reached by the United States

A record $1.47 trillion budget deficit is set to be reached by the United States — almost 10 percent of its gross domestic product. The good news is that it is $84 million short of the projected deficit set earlier by the government.

However, the White House Office of Management and Budget (OMB) on Friday announced in their mid-season review that for next fiscal year, the deficit will hit $1.416 trillion, up by $150 billion from earlier projections. The deficit then will represent 9.2 percent of GDP.

The White House issued the budget changes and downplayed the significance of the numbers.

“These are not substantial changes and nothing we want to make too big a deal about,” said Peter Orszag, director of the OMB. “The economy remains weaker than we would like and the unemployment rate higher than we would like.”

The budget deficit is one contentious issue leading up to the elections later this year, with many voters apprehensive about the ballooning numbers. Since the government is the largest borrower, changes in the deficit will affect pension funds or investments in treasury securities. The US deficit situation is also being monitored by other industrial nations who announced in a summit in Toronto earlier this year that they will target lower deficits themselves.

House Democrats introduced a bill this week called the REDUCE Acts which they tout as a measure that can save $70 billion over the next ten years that can lessen the deficit. But at the same time, Congressional Democrats also passed a bill extending federal unemployment benefits costing $34 billion and adding to the deficit.

Posted by James Fried on Friday July 30 2010, 9:56 AM EST. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0