Big deficit for 2011, but some improvement on tap

http://money.cnn.com/2011/08/24/news/economy/federal_budget_cbo/index.htm?hpt=hp_t2

NEW YORK (CNNMoney) -- The United States is still set to rack up large deficits in the next decade, but not quite as large as previously estimated. At the same time, economic growth is expected to be modest and the unemployment rate is likely to stay high for a few more years.

Those are just a few of the conclusions that the Congressional Budget Office draws in its update to its 10-year budget and economic outlook.

Over the next decade, the country is set to rack up a total of $8.5 trillion in new debt, with annual deficits averaging 4.3% of gross domestic product, the Congressional Budget Office said in its budget and economic outlook update. The deficit for this year will be twice that, at 8.5% of GDP.

On the bright side, those estimates are an improvement over what CBO was forecasting in January, when it estimated that the country would accrue $12 trillion in new debt over the next decade.

The CBO 10-year estimates assume many of the policies in effect today will continue rather than expire as they are scheduled to under current law.

Such policies include the Bush tax cuts which are set to expire at the end of 2012; the so-called doc fix that lawmakers regularly pass to stave off Medicare payment cuts to doctors; and the measures taken to protect the majority of Americans from having to pay the Alternative Minimum Tax.

If, by contrast, lawmakers stick to current law -- meaning they let various expensive policies expire as scheduled -- the debt picture improves. Under such a scenario, cumulative 10-year deficits are estimated at $3.5 trillion, or $5 trillion less than if today's policies are extended.

this is a catastrophe for workers

Modest economic growth also means the unemployment rate is likely to stay high. The CBO expects it will remain above 8% until 2014 then average 7% from 2013 to 2016, before falling to 5.2% on average from 2017 to 2021.