Trimming the deficit will be no easy task

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The nonpartisan Congressional Budget Office (CBO) said today that the U.S. government’s budget deficit will likely widen to $1.5 trillion this year, up from last year’s $1.3 trillion.

The projected shortfall will be caused in part by the cost of the $858 billion tax-cut extension passed in Congress’ lame-duck session, the group said.

The projections are based on the assumption that tax and spending policies play out as specified under current law, and understate the deficits that would occur if many policies currently in place are continued rather than allowed to expire.

The government will run up $12 trillion in deficits during the next 10 years if Congress permanently extends the tax-cut package and prevents scheduled cuts in Medicare payments to doctors. By 2021, the nation’s debt could rise to almost 100 percent of the gross domestic product, the highest since World War II, the report said.

The report also projected the economy will grow three percent this year and the unemployment rate will fall to 9.2 percent.