Half-Trillion-Dollar Budget Deficits Ahead

You might think that the housing crisis and economic slowdown would force the presidential candidates to reshuffle some of their economic plans. Certainly, huge budget deficits might. This from Goldman Sachs:

We are raising our forecast for the fiscal 2008 federal budget deficit to $500 billion (3.6% of GDP) from $425 billion. Even with that increase, the risks are skewed to the high side.... Forecasters tend to underestimate the power and extent of a turn in direction when it occurs. So it is with the federal budget, which improved much more sharply than we anticipated from fiscal year (FY) 2004 to FY 2007 but now appears to be deteriorating more quickly than we estimated just a few weeks ago. With five months of the fiscal year now behind us, we are boosting our estimate of the FY federal deficit to $500 billion (bn) from the $425bn that we announced on February 8.

Tags: federal budget | federal deficit

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