CBO Projects $1.28T Deficit in FY 2011 if Debt Deal Is Carried Out
The federal budget deficit for fiscal year 2011 will reach $1.28 trillion, or 8.5% of gross domestic product, according to new projections from the Congressional Budget Office, Roll Call reports
Analysts said the amount as a share of the economy is the third-largest deficit in U.S. history, surpassed only by deficits in 2009 and 2010.
Details of Projections
In an updated budget and economic outlook released Wednesday, CBO said, "The deficit that CBO projects for 2011 is lower than what the agency estimated in March," adding, "Nevertheless, this year's shortfall â¦ will still be much larger than the average annual deficit of 2.8% experienced over the past 40 years."
Analysts noted that the projections assume that all savings determined in the recent debt deal will be realized and that scheduled Medicare provider payment cuts occur, among other fiscal initiatives (Sanchez, Roll Call, 8/24). If all expected savings are realized, the government will accumulate $3.47 trillion in new debt over the next 10 years, according to analysts (Fletcher, Washington Post, 8/24).
If the savings from the budget deal do not materialize or if the government delays making cuts to physicians' Medicare reimbursements -- as it has done numerous times -- average deficits from 2012 through 2021 would make up 4.3% of GDP, compared with the 1.8% CBO estimated (Roll Call, 8/24).
CBO Director Douglas Elmendorf said, "If we continue current policies, we will end up with much larger deficits than what would occur under current law" (Cook, National Journal, 8/24).
Debt Panel Prepares for Meetings
Meanwhile, the co-chairs of the debt panel established by the budget deal recently announced that members are reviewing deficit reduction work of other lawmakers to prepare for upcoming meetings (Drawbaugh/Cowan, Reuters, 8/24).
As part of the recent debt deal, the panel will develop and pass by the end of November at least $1.2 trillion in federal spending cuts over 10 years. Failing to do so would trigger a series of across-the-board cuts. Medicaid would be exempt from those cuts, and Medicare is protected from deep spending cuts. However, the deficit panel is not bound by those stipulations (California Healthline, 8/12).
Sen. Patty Murray (D-Wash.) and Rep. Jeb Hensarling (R-Texas) in a joint statement said that panel members "are engaging in serious discussions to determine what set of rules will govern the committee's operation, examining a schedule of potential meetings and exploring how to build a committee staff that will help us achieve success" (Steinhauer, "The Caucus," New York Times, 8/24).
A Senate aide familiar with the debt discussions said the panel's first meeting likely will occur after Sept. 6 (Reuters, 8/24). Observers note that the panel likely will consider changes to Medicare and Medicaid, in an effort to control entitlement spending (Caramenico, Fierce Healthcare, 8/24).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.