Investors, consumers and companies may pay the price as the
deficit swells and a return to surplus is delayed by a sluggish
economy and increased government spending. The U.S. will have to increase the amount it borrows to refinance maturing debt as it funds a growing deficit, sending yields higher on Treasuries and
consumer borrowing, some economists said.
Of the 22 firms that trade with the Federal Reserve, called
primary dealers, almost half don’t expect a return to surpluses.
Rhode Island's Market Has Changed. Developers, Builders, Investors and Sellers Must Change With It.
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“I will be in my grave by then,” said 56-year-old Ed
McKelvey, Goldman Sachs’s senior U.S. economist, who said that
he’s in “pretty good health.”
“We can’t be comfortable forecasting a surplus for any
fiscal year at least for the next 10 years,” he said. After that
period “you are in the baby boomer retirement years,” referring
to the 29 percent of the U.S. population born between 1946 and
1964, making it an even more difficult task, he said.
U.S. deficits are projected to rise above Australia’s $404
billion gross domestic product as Congress debates the size of a
tax reduction. Already the president’s $726 billion tax-cut
package to boost economic growth has been reduced by Congress to
between $350 billion and $500 billion.
Increased spending for items such as prescription drugs “is
likely going to keep us in deficit,” said David Greenlaw, an
economist at Morgan Stanley. The shortfall may be as high as $370
billion this fiscal year and to $375 billion in 2004, he said.
The U.S. hasn’t seen an annual budget surplus since 2001, and
deficits come at a time when government borrowing is soaring. The
Treasury will have to refinance $564 billion of Treasuries that
mature in 2004 as well as borrow to finance the deficit.
Bloomberg News
