US federal budget deficit

Even if the United States saved billions of dollars by withdrawing all troops from Iraq and Afghanistan, President George W. Bush would still be unlikely to fulfill his promise of reducing the federal budget deficit by half within five years, the nonpartisan Congressional Budget Office said.

In the last independent assessment of Bush's fiscal policies before the November election, the Congressional agency predicted on Tuesday that, if no existing laws change, the federal deficit will decline to $312 billion in 2009 from a record of $422 billion in 2004, reports International Herald Tribune.

According to the Globe and Mail, Unless Congress lifts the sunset clause on U.S. President George W. Bush's tax cuts, the cumulative deficit could exceed $4-trillion over the decade.

Worse still, the rapidly aging baby boom population is expected to sap the work force, while adding to the burden of costly government programs, such as Medicare and Social Security.

Some economists also pointed out that the CBO forecast may rely on overly optimistic forecasts of economic growth -- at least in the short term. For example, the agency expects the economy to grow at a rate of 4.5 per cent this year and 4.1 per cent next year.

US central bank chief Alan Greenspan has said the economy is emerging from a summer lull despite soaring oil prices.

Mr Greenspan added that last month's record surge in oil prices had had little impact on inflation.

However, he warned that the US public finances were set to "deteriorate substantially" in the years ahead unless current spending policies changed, informs BBC News.

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