CBO forecasts large federal budget deficit

The Congressional Budget Office (CBO) has projected a budget deficit of about $157 billion in FY02. The expected continued economic downturn means that healthcare providers looking for improvement in Federal payments may find it more difficult to garner the needed Congressional support.

The

deficit will be fueled by a sharp decline in tax revenues coupled with double-digit growth in spending. CBO says that if current tax and spending policies are maintained, deficits are likely to persist for several years before giving way to small surpluses. Between 2003 and 2009, those annual deficits and surpluses generally would equal less than 1 percent of the nation's gross domestic product. For the 10-year period from 2003 through 2012, CBO's baseline projects a total surplus of $1.0 trillion. However, most of that amount would be realized after 2010, when the tax cuts enacted last year are scheduled to expire.

CBO constructs its baseline according to rules specified by law. Those rules involve extending current laws and policies into the future and estimating their effect on the budget. The baseline projections serve as a benchmark that lawmakers can use to measure the effects of proposed changes in revenue and spending policies. CBO says those projections are not intended to be a forecast of future outcomes. Actual budget figures will differ from CBO's baseline projections because of future economic developments, legislative actions, and technical errors in estimating.

For additional information, go to http://www.cbo.gov and click on The Budget and Economic Outlook: An Update.