WASHINGTON - The overall U.S. budget deficit could hit $250 billion this year, largely due to a weakening economy and the costs of wars in Iraq and Afghanistan, according to the Congressional Budget Office and a top Senate official.
The non-partisan CBO says that once the cost of wars in Iraq and Afghanistan is added to its "baseline" deficit estimate of $219 billion, the deficit would be about $250 billion.
And that figure does not reflect at least $100 billion in additional red ink from an upcoming deficit-financed economic stimulus measure now being negotiated between the White House and Congress.
Such a figure greatly exceeds the $163 billion in red ink registered last year.
"After three years of declining budget deficits, a slowing economy this year will contribute to an increase in the deficit," the CBO report said.
Senator Kent Conrad (D-N.D.), the Senate budget committee chairman, said the 2008 deficit would reach more than $350 billion once the costs of an upcoming economic stimulus measure are factored in.
The CBO crunches economic and budget data for lawmakers.
Unlike an increasing number of economists, CBO does not forecast a recession this year. It instead forecasts a growth rate of 1.7 per cent, down from 2.2 per cent real growth in the gross domestic product (GDP) last year.
"Although recent data suggest that the probability of a recession in 2008 has increased, CBO does not expect the slowdown in economic growth to be large enough to register as a recession," CBO said.
But the CBO economic forecast was completed last month, before a recent spike in unemployment and the release of disappointing holiday retail sales figures.
"A number of ominous economic signs have emerged since CBO finalized last month the forecast underlying today's report," said Representaive John Spratt Jr. (D-S.C.), chairman of the House budget committee.
"Today's new economic forecast thus adds to the growing evidence that the economy has weakened, and that policymakers in Washington must take action."
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