Saturday, February 16, 2008

Deficit outlook worsens

President Bush's 2009 Budget was released on Monday, February 4th. The following graph shows selected measures of the U.S. deficit according to that budget:

The most commonly discussed measure of the deficit is the unified deficit, shown in purple. The graph shows the actual values of the unified deficit through 2007 and projected values from 2008 forward. In addition, the dotted purple line shows the projected values of the unified deficit from last year's budget. The actual numbers and sources can be found at

As can be seen, the unified deficit for 2007 is $82 billion less than was projected in the prior budget. However, the outlook for the next two years has greatly worsened. The prior budget projected that the deficit would gradually decline, reaching a small surplus of $61 billion in 2012. It is now projected to worsen by over $200 billion per year for the next two years and then decline rapidly, still reaching a small surplus (of $48 billion) in 2012. However, due to the high deficits of the next two years, the gross federal debt is projected to be $381 billion greater in 2012 than was projected in the prior budget.

Regarding the worsening deficit over the next two years, following is an excerpt from page 16 of the budget:

The 2008 deficit is projected to be $410 billion, or 2.9 percent of GDP, and the 2009 deficit is projected to be $407 billion, or 2.7 percent of GDP. The primary reason for increasing deficits in the near term is the President’s economic growth package and an expected slowing of receipt growth, due to an expected reduction in corporate tax receipts from recent high levels. Another reason for increases in the projected near-term deficits is increasing defense and emergency spending.

Debt outlook

Long-run Budget Projections

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About Me

I became interested in U.S. budget and economic matters back in 1992, the first time that I remember the debt becoming a major issue in a presidential election. Along with this blog, I have a website on the subject at I have blogged further about my motivations for creating this blog and website at this link. Recently, I've been working on replicating studies such as the analysis at this link.

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