CBO Budget Update Sees $1.1 Trillion FY 2012 Deficit

February 2, 2012 03:36 AM

The Congressional Budget Office (CBO) projected the U.S. government faces a fourth year of deficits exceeding $1 trillion in Fiscal 2012 but says the red ink would markedly decline if Bush-era tax breaks are allowed to expire at the end of this year.

If Congress doesn't take action to extend current policies, CBO estimates that the debt held by the public will go from 68% of GDP in 2011 to 62% of GDP in 2022 and deficits will average 1.5% of GDP over the course of the decade.

But Congress will extend at least some of the current tax provisions. If current policies are extended and Congress rejects automatic spending reductions, CBO said deficits will swell to 5.4% of GDP over the next 10 years and the debt will grow to 94% of GDP by 2022 — the highest level since just after World War II.

The CBO forecasts for unemployment are for it to stay above 8% through FY 2014 — an average of 8.8% for FY 2012, 9.0% each for 2013 and 2014 — and only decline to 7.8% for FY 2015.

For the Supplemental Nutrition Assistance Program (SNAP), outlays are forecast to be above $80 billion in FY 2012, 2013 and 2015, and be just below that mark in 2014. Specifically, CBO sees FY 2012 at $80.112 billion, FY 2013 at $81.956 billion, FY 2014 at $79.871 billion and FY 2015 at $80.033 billion.

As for agriculture, overall farm program payments (direct, counter-cyclical program, Average Crop Revenue Election and marketing loan program) are seen nearly unchanged from the January 2011 CBO projections, largely due to an increase forecast in ACRE payments basically offsetting lower CCP and loan program payments.

CBO now expects FY 2013-22 CCPs to total $1.036 billion compared to $1.85 billion for the FY 2012-21 period forecast in January 2011. ACRE payments are now seen at $5.2 billion over FY 2013-22 versus their year-ago forecast of $4.2 billion for FY 2012-22. Marketing loan benefits are seen at $777 million for FY 2013-22 compared to their year-ago forecast of $976 million over the FY 2012-21 period.

Total payments are seen at $56.568 billion for FY 2013-22, up 0.26% from the $56.419 billion forecast in Jan. 2011 for the FY 2012-21 period.

The updated projections are based on higher prices forecast for many crops compared to the CBO update issued in January 2011. CBO now expects corn prices for the 2011 marketing year to be at $6 per bu., compared to their year-ago projection of $5.24 per bushel. Soybean prices for the 2011 marketing year are forecast at $11.95 per bu. compared to $11.70 per bu. in Jan. 2011; wheat prices at $7.30 per bu. vs. $6.40 in Jan. 2011 and cotton prices at 90 cents per lb. compared to 81 cents per lb. in January 2011.

For the 2012 marketing year, however, CBO expects corn prices at $4.95 per bu., soybeans at $11.00 per bu. wheat at $6.05 per bu. and cotton at 82 cents per pound. Those figures compared to their year-ago projections are up 11.4% for corn, down 2.8% for soybeans, up 4.85% for wheat and up 14.5% for soybeans. The average prices cited are based on marketing years for corn and soybeans that start Sept. 1, wheat June 1 and cotton Aug. 1.

USDA's long-term baseline assumptions are to be released Feb. 13.

Following are links to updated projections from the Congressional Budget Office (CBO) for agriculture spending and assumptions:

January 2012 Baseline for CCC & FCIC

Program Payment Summary 1

Program Payment Summary 2

Supplemental Nutrition Assistance Program

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