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US Budget Deficit Nearing $600b
World Economy

US Budget Deficit Nearing $600b

The White House on Friday predicted that the government's budget deficit for the soon-to-end fiscal year will hit $600 billion, an increase of $162 billion over last year's tally and a reversal of a steady trend of large but improving deficits on President Barack Obama's watch.
The disappointing figures, while expected, come after the deficit has steadily declined since the huge $1.4 trillion deficit Obama inherited after the deep 2007-2009 recession and the associated fiscal crisis, AP reported.
The improving economy, tax increases on higher-income earners and cuts to annual agency budgets have helped close the gap over Obama's tenure. Many economists say the longer-term picture is troubling and warn that the rising debt will be a drag on the economy in the future.
The budget and economic update also officially downgrades the White House's view of the economy, predicting growth of 2.2% this year instead of the 2.7% growth rate it predicted in its February budget. But it also says inflation will stay in check, predicting a 1.1% increase in consumer prices versus the 1.4% it forecast in the winter.
As he has for years, without success, Obama Friday again called for tax increases and minor curbs on health providers to close the deficit in the future. Such proposals are nonstarters with the GOP-controlled Congress. In 2011, Obama was forced to accept major spending cuts in exchange for an increase in the government's borrowing cap.
But the elusive "grand bargain" Obama sought with Republicans such as former House Speaker John Boehner of Ohio never came together.
At the beginning of 2013, however, Obama won an increase in the top income tax rate from 35% to 39.6% as part of an agreement with Republicans to avert a "fiscal cliff." More recently, Republicans and Obama have sealed small-scale agreements to ease tight curbs on annual agency operating budgets.
The administration's forecast that the economy, as measured by the gross domestic product, will grow by just 2.2% this year is still more optimistic than many other forecasters. The Federal Reserve last month trimmed its GDP forecast from 2.2% to 2% and economists at JPMorgan Chase are even more pessimistic, expecting the economy to grow by just 1.8% this year, down from last year's 2% gain.
At the beginning of the year, the hope was that economic growth would accelerate in 2016 but the year got off to a wobbly start when economic troubles in China sent shockwaves through financial markets. More recently, the June 23 vote in Britain to leave the European Union roiled global markets and shook consumer and business confidence.
The US economy grew at an anemic 1.1% rate in the first three months of this year. But analysts believe growth accelerated to above 2% in the April-June quarter.
The 2016 budget year ends Sept. 30.

 

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