The U.S. budget deficit for the current budget year will rise to about $250 billion, the Congressional Budget Office (CBO) estimated Wednesday, citing the weakening economy. However, that figure does not include at least $100 billion from an upcoming deficit-financed economic stimulus measure being drafted by the White House and congressional leaders. “After three years of declining budget deficits, a slowing economy this year will contribute to an increase in the deficit,” the CBO report said. The new estimate is much higher than the $163 billion deficit registered last year. Officially, CBO estimated this year's deficit to be $219 billion. But including likely but still unapproved spending for the wars in Iraq and Afghanistan, the 2008 deficit would total about $250 billion, the report said. The 2006 deficit was $248 billion, and had fallen from a high of $413 billion in 2004. Senate Budget Committee Chairman Kent Conrad (Democrat from North Dakota) said the 2008 deficit would reach more than $350 billion once the costs of an upcoming economic stimulus measure are included. Unlike an increasing number of economists, the CBO is not forecasting a recession this year. Instead, it forecasts a growth rate of 1.7 percent, down from 2.2 percent growth in the gross domestic product (GDP) last year. “Although recent data suggest that the probability of a recession in 2008 has increased, CBO does not expect the slowdown in economic growth to be large enough to register as a recession,” CBO said. However, the CBO economic forecast was completed last month before a recent spike in unemployment and the release of disappointing holiday retail sales figures. “A number of ominous economic signs have emerged since CBO finalized last month the forecast underlying today's report,” said House of Representatives Budget Committee Chairman John Spratt (Democrat from South Carolina). “Today's new economic forecast thus adds to the growing evidence that the economy has weakened, and that policymakers in Washington must take action.”
