US deficit to reach historic high: Forecast

WASHINGTON — The US budget deficit will hit a record-breaking 1.5 trillion this year, the Congressional Budget Office projected Wednesday, thanks in part to a recent tax cut deal.

Constrained revenues and increased spending to revive the economy will push the deficit to a whopping 9.8 percent of gross domestic product this year, according to the forecast.

The CBO, which is considered a bipartisan scorekeeper in the hotly contested debate over US debt, said an expected uptick in tax revenues as the economy improves would not fully materialize.

"The recovery now under way might be expected to lessen the budget imbalance in 2011 by increasing tax revenues and decreasing spending for certain income-support programs, such as unemployment compensation," it said.

"However, revenue growth will be restrained by the slow and tentative pace of the recovery and by the 2010 tax act."

In December President Barack Obama signed into law a cross-party deal that extended tax cuts passed by former president George W. Bush along with unemployment benefits.

With an aging population taking more in benefits and contributing less to revenues, the cumulative deficit is expected to rise to $12 trillion between 2012 and 2021, or 97 percent of annual GDP.

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