US budget deficit to be ‘biggest since WWII’
Source: FT.com
America’s budget deficit is likely to reach nearly $1,200bn this year even without Barack Obama’s planned fiscal stimulus of about $775bn being taken into account, the country’s budget watchdog warned on Wednesday.The Congressional Budget Office estimate threw into stark relief the dilemma that the president-elect faces, highlighting both the need for stimulus to support the economy and the already perilous state of US public finances.
Mr Obama said the fiscal stimulus would be “on the high end of our estimates” – $675bn to $775bn over two years – but “will not be as high as some economists have recommended, because of the constraints and concerns we have about the existing deficit”.
The president-elect spoke as he appointed Nancy Killefer, a Clinton-era economic official, to a cabinet-level post to cut government waste, apparently to reassure fiscal conservatives alarmed by the giant deficits in prospect.
The CBO said the budget deficit for the fiscal year 2009 would “shatter the previous post-world war two record” relative to the size of the US economy. Without a stimulus, the CBO said, the deficit would reach 8.3 per cent of gross domestic product.
The budget watchdog refused to estimate how large the deficit would be with a stimulus until it had more detail. But its numbers imply a US fiscal deficit of more than 10 per cent of GDP.
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