The US federal budget deficit will widen to another record level this year and will worsen over the coming decade, according to the latest forecasts by the Congressional Budget Office (CBO). In its bi-annual budget outlook, the CBO forecast a 2004 forecast of USD477bn, up from USD374bn last year, which beat the previous record of USD290bn, set in 1992. The CBO also predicted that the deficit will reach nearly USD1.9 trillion between 2005 and 2014, up from an earlier prediction of USD1.4 trillion.
The 10-year forecast is based on current federal spending plans and tax policy and does not take into account US president George Bush's plans to make last year's tax cuts permanent. In his State of the Union address last week, Bush said that further tax cuts must be approved to promote further growth and to help the labour market to recover. He also pledged to cut the budget deficit in half within five years. Following that pledge, White House officials announced a freeze on federal discretionary spending next year not connected to defence or homeland security, but analysts say that this will have only a minimal impact on the deficit. //www.fxcentre.com