Will Country Post Fifth Straight Trillion Dollar Deficit?

The "good" news? The United States is projected to post their "smallest" deficit since 2008 in the current fiscal year (2013).

The bad news? There is still a chance that the United States could post another trillion dollar deficit.

According to the Office of Management and Budget, the United States is projected to post a deficit of $901 billion in the 2013 fiscal year. This preliminary estimate pegs total receipts at about $2.9 trillion and total outlays at around $3.8 trillion.

The CBO (Congressional Budget Office), in their "Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022), is currently projecting a $1.0 trillion deficit for the current fiscal year, provided that:

-all expiring tax provisions are extended indefinitely
-AMT is indexed for inflation after 2011
-Medicare's payment rates for physicians are held constant
-automatic spending cuts do not occur

If these things DON'T happen, the CBO predicts that the deficit will shrink down to $641 billion for the 2013 fiscal year. The downside to this scenario taking place? The economy would likely tip into another recession - the CBO estimates that real GDP would likely decline between 0.5% between Q4 2012 and Q4 2013 if the things listed above don't happen, PLUS the CBO estimates that the national unemployment rate would move over 9% once again.

This is the "fiscal cliff" that you may have heard about, which is the simultaneous tax increases and automatic spending cuts that are slated to go into effect in just a few months (expiration of "Bush tax cuts", etc). Assuming that the two sides are able to come to some sort of an agreement, the projected deficit this year is slated to be between $900 billion and $1 trillion. No agreement? The deficit would be significantly smaller, but the country may very well slide into another recession.

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The deficit numbers for the last five years look something like this:

2008 - $459 billion
2009 - $1.413 trillion
2010 - $1.294 trillion
2011 - $1.299 trillion
2012 - $1.1 trillion

Will 2013 top the trillion dollar mark once again?

Source: CBO

Source: OMB

Source: History of Deficits and Surpluses

Filed under: General Knowledge