US deficit could hit $1.5 trillion


President Barack Obama could have to battle with record US government deficit spending of 1.5 trillion US dollars, it is claimed (AP)

The US government’s deficit spending will surge to a record $1.5 trillion (£941 billion) this year amid tax cuts and the slow economic recovery, congressional budget experts have estimated.

The figures will fuel the debate over looming legislation that would allow the government to borrow more money as the national debt nears the $14.3 trillion (£8.9 trillion) cap set by law.

Republicans controlling the House of Representatives have said they will not raise the limit without significant budget cuts.

The chilling figures, which also included estimates of a nationwide unemployment rate of 8.2% on election day in 2012, come a day after President Barack Obama called in his State of the Union address for a five-year freeze on optional spending in domestic agency budgets passed by Congress each year.

The Congressional Budget Office estimates indicate the government will have to borrow 40 cents for every dollar it spends this fiscal year, which ends on September 30. Tax revenues are projected to drop to their lowest levels since 1950 when measured against the size of the economy.

The report also revealed that after decades of surpluses for the federal social security pension programme, its vast costs are no longer covered by payroll taxes.

Democrats and Republicans agree that stern anti-deficit steps are needed, but neither Mr Obama nor his resurgent rivals in Congress are – so far – willing to put on the table cuts to popular benefit programmes such as farm subsidies and entitlement programmes for the elderly like social security and Medicare.

The need to pass legislation to fund the government and prevent a first ever default on US debt obligations is expected to drive the two sides into negotiations.

Though the analysis predicts the economy will grow by 3.1% this year, it foresees unemployment remaining above 9% and the US is not projected to be at full employment – considered to be a unemployment rate of about 5% – until 2016.

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