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US budget deficit to hit record this year

27 January 2011 13:42 (UTC +04:00)

Baku - APA-Economics. The Congressional Budget Office in the US has revealed that the US budget deficit this year will jump to its highest level ever in the history of the country, Malaysia Sun reported.

The budget shortfall for 2011 will reach a staggering US $1.48 trillion, which is the highest ever on record, taking the crown from the 2009 deficit of US $1.41 trillion. In 2010 the deficit reached US $1.29 trillion.

To put the figures in context, the deficit, as portion of the US GDP, will reach 9.8%, which is just less than the 10% peak in 2010 in the depths of the recession. Both these figures are the highest and second highest since the Second World War.

The entire tax revenues of the US government in 2011 are estimated to be around US $2.6 billion, meaning that in order to eliminate the budget deficit entirely, the government would need to cut its spending by around 53%, assuming tax revenues remained the same.

The budget deficit was meant to be slowly brought down this year, but a bipartisan agreement to extend Bush-era tax cuts added US $858 billion to the budget shortfall. The tax cuts, which apply to all income categories and provide tax breaks for businesses, are seen as contributory to the recovery.

The entire public debt will now reach at debt to GDP ratio of 69.4%, up from 62.1% last year.