<html> <head><style type ="text/css">body { font-family: "Bloomberg Prop Unicode I", Verdana, sans-serif; font-size:125%; letter-spacing: -0.3pt; color: #FF9F0F; background-color: #000000; text-align: left; } p {line-height: 1.25em; max-width:900px; width:expression(document.body.clientWidth > 900? "900px": "auto" );} h1, h2, h3 { text-align: left; font-weight: normal; color: #FFFFFF; } h1 { font-size: 130%; } h2 { font-size: 115%; } h3 { font-size: 100%; } #bb-style { font-size: 90%; max-width:900px; width:expression(document.body.clientWidth > 900? "900px": "auto" ); } b, strong { font-weight: bold; } i, em { color: #FEC54A; } pre { font-family: "Andale Mono", "Monaco", "Lucida Console"; letter-spacing: -0.3pt; line-height: 1.25em; } table { border: 0; font-size: 90%; width: 100%; margin-left: auto; margin-right: auto; } td, tr { text-align: left; } td.numeric { text-align: right; } a:link { color:#53B2F5; text-decoration: none; } a:visited {color:#53B2F5} a:active {color:#53B2F5} a:hover {color:#53B2F5} </style> </head> <body> <p>By Paula Dwyer</p>&#xD; &#xD; <p>The Congressional Budget Office this morning updated its <a href="http://www.cbo.gov/doc.cfm?index=12316">projections</a> for the U.S. budget deficit, unemployment and economic growth. It's a lot like the weather: Partly cloudy, with a chance of storms ahead. For the deficit, the CBO&#xA0;now estimates the red ink will total $1.3 trillion for the fiscal year ending Sept. 30, down slightly from a previous projection of $1.4 trillion.</p>&#xD; &#xD; <p>A little better, but even so,&#xA0;2011 would be the third consecutive year of deficits above the trillion-dollar mark. At&#xA0;8.5 percent of GDP, the deficit would be the third-largest&#xA0;since 1946.</p>&#xD; &#xD; <p>For fiscal 2012, the CBO projects a deficit of $973 billion, down from its previous forecast of $1.1 trillion.</p>&#xD; &#xD; <p>It expects joblessness to fall to 8.9 percent in this year's fourth quarter, and to 8.5 percent by the end of 2012. But the CBO sees unemployment remaining above 8% until 2014.</p>&#xD; &#xD; <p>The&#xA0;budget office&#xA0;updated its July forecast to reflect the policy changes enacted in the Budget Control Act,&#xA0;aka the debt-ceiling deal. The new outlook, however, does not reflect other developments since early July, including this month's plunging stock markets and the weakness in some economic indicators.</p>&#xD; &#xD; <p>The CBO said it would have tempered its near-term growth forecast if it took all that into account. With that caveat, CBO projects inflation-adjusted GDP will be a still sluggish&#xA0;2.3 percent this year and 2.7 percent in 2012. That forecast reflects CBO&#x2019;s expectation of continued growth in business investment, modest consumer spending increases, gains in net exports (exports minus imports) and the beginning of a recovery in new-home construction.</p>&#xD; &#xD; <p>The budget agency warned of larger deficits and&#xA0;greater debt&#xA0;if&#xA0;Congress extends the Bush tax cuts, indexes the alternative minimum tax&#xA0;for inflation, and prevents cuts to Medicare payments to physicians -- each a policy under&#xA0; discussion on Capitol Hill. If all that happens,&#xA0;annual deficits from 2012 through 2021 would average 4.3 percent of GDP, compared with 1.8 percent in CBO&#x2019;s baseline projections.</p>&#xD; &#xD; <p>(Paula Dwyer is a member of the Bloomberg View editorial board.)</p> </body> </html>