From the Republican staff of the Senate Joint Economic Committee:

The Congressional Budget Office (CBO) released its outlook today (“The Budget and Economic Outlook: Fiscal Years 2009 to 2019,” January, 2009, available at www.cbo.gov ), and anticipates that the deficit this year will total $1.2 trillion, or 8.3% of the gross domestic product (GDP), under “baseline” assumptions. That projection does not include any effects of future legislation, including the economic stimulus measures currently under debate. (Under rules governing CBO’s budget projection, a “baseline” projection is required to assume that federal laws and policies regarding spending and taxes remain unchanged from current laws and practices). Highlights of today’s CBO release include:
· The deficit this year is projected to total $1.2 trillion, or 8.3% of GDP, well above the post-World War II record high of 6.0% realized in 1983.
o Outlays this year include more than $180 billion to reflect the present value of the net cost of transactions under the Troubled Asset Relief Program (TARP), which was set up in the fall of 2008. The net cost is, roughly, the purchase prices of assets minus risk-adjusted projected future earnings from holding the purchased assets along with the proceeds from the eventual sales of the assets.
o The 2009 deficit also incorporates CBOs estimate of the cost to the federal government of the takeover of Fannie Mae and Freddie Mac. CBO has concluded that the operations of those “government sponsored enterprises (GSEs)” should be included in the federal budget as they are under direct control of the federal government. Recognition of the cost in 2009 of GSE operations adds about $240 billion to the deficit this year.
· The deficit in 2010 is projected to total $700 billion, or 4.9% of GDP (lower than the 2009 deficit projected under current law, but still about twice as high as the average deficit relative to GDP over the past 40 years).
o Much of the decline from the projected 2009 deficit derives from smaller projected outlays for the GSEs and TARP and a significant revenue boost from the alternative minimum tax (reflecting the baseline assumption that the exemption amounts for that tax will revert to previous levels, even though they have been adjusted annually for the past several years).
Source: CBO, Baseline Projections