A Congressional report said tough budget measures could cut the US deficit, but would keep unemployment high © AFP/File Karen Bleier

AFP

WASHINGTON (AFP) – The huge US budget deficit, which earned the country its first credit rating downgrade, will drop quickly by 2013 if planned spending cuts are implemented and temporary tax breaks end, a new government report said Wednesday.

But with such a tough budget regimen the unemployment rate will remain above eight percent for the next three years, the Congressional Budget Office said in a new study.

The CBO said that the budget deficit could fall from $1,284 trillion this year, or 8.5 percent of gross domestic product, to just $510 billion, or 3.2 percent of GDP, by 2013 under certain key conditions.

Those include implementing a new $2.4 trillion austerity plan, letting a handful of tax breaks expire, and cutting payments to doctors in the public Medicare health service.

If all were put in place, and if economic growth hits 2.3 percent this year and 2.7 percent next year, the result could be a sharp contraction of the government deficit that would put it at around 1.7 percent of GDP by 2018.

That outcome would counter the arguments made by Standard & Poor’s when it cut Washington’s credit rating one notch from the top-line AAA grade on August 5, citing high debt and deficits and expressing doubts that the country’s politicians could agree on a credible deficit-cutting program.

The CBO’s assumptions are that the August 2 Budget Control Act, passed by Congress amid deep rancor in a rush to avoid forcing the country to avoid defaulting on its debt, is implemented.

The austerity plan mandates $900 billion in spending cuts and that a panel of Democrats and Republicans in Congress agree by November additional measures to reduce the deficit by $1.5 trillion.

S&P and others expressed doubts that the panel will be able to agree: Democrats already have signaled they want to end tax breaks and raise some taxes, while Republicans have adamantly refused any tax hikes.

Economists also worry that sharp spending cuts will restrain the economy and job creation; many have already cut their forecasts for growth this year to less than 2.0 percent.

“If some of the changes specified in current law did not occur and current policies were continued instead, much larger deficits and much greater debt could result,” the CBO warned.

© AFP — Published at Activist Post with license

A Congressional report said tough budget measures could cut the US deficit, but would keep unemployment high © AFP/File Karen Bleier

AFP

WASHINGTON (AFP) – The huge US budget deficit, which earned the country its first credit rating downgrade, will drop quickly by 2013 if planned spending cuts are implemented and temporary tax breaks end, a new government report said Wednesday.

But with such a tough budget regimen the unemployment rate will remain above eight percent for the next three years, the Congressional Budget Office said in a new study.

The CBO said that the budget deficit could fall from $1,284 trillion this year, or 8.5 percent of gross domestic product, to just $510 billion, or 3.2 percent of GDP, by 2013 under certain key conditions.

Those include implementing a new $2.4 trillion austerity plan, letting a handful of tax breaks expire, and cutting payments to doctors in the public Medicare health service.

If all were put in place, and if economic growth hits 2.3 percent this year and 2.7 percent next year, the result could be a sharp contraction of the government deficit that would put it at around 1.7 percent of GDP by 2018.

That outcome would counter the arguments made by Standard & Poor’s when it cut Washington’s credit rating one notch from the top-line AAA grade on August 5, citing high debt and deficits and expressing doubts that the country’s politicians could agree on a credible deficit-cutting program.

The CBO’s assumptions are that the August 2 Budget Control Act, passed by Congress amid deep rancor in a rush to avoid forcing the country to avoid defaulting on its debt, is implemented.

The austerity plan mandates $900 billion in spending cuts and that a panel of Democrats and Republicans in Congress agree by November additional measures to reduce the deficit by $1.5 trillion.

S&P and others expressed doubts that the panel will be able to agree: Democrats already have signaled they want to end tax breaks and raise some taxes, while Republicans have adamantly refused any tax hikes.

Economists also worry that sharp spending cuts will restrain the economy and job creation; many have already cut their forecasts for growth this year to less than 2.0 percent.

“If some of the changes specified in current law did not occur and current policies were continued instead, much larger deficits and much greater debt could result,” the CBO warned.

© AFP — Published at Activist Post with license