CBO Says US Budget Shortfall Could Reach $294 Billion

The Congressional Budget Office warned that the federal government's fiscal position is deteriorating, with markets focused on the prospect of a wider deficit and increased Treasury issuance.

Walter Bloomberg reported on June 8 that the CBO estimates the US federal budget shortfall could reach as much as $294 billion.

The agency said pressure on the fiscal balance is mounting as tax revenue declines and spending rises.

It added that concerns over an economic slowdown and changes in tax policy could reduce government revenue.

Markets are also weighing the risk that a wider fiscal deficit would increase US Treasury issuance and, over time, add to the government's debt burden.

Fiscal debate in the US has recently centered on extending tax cuts, expanding defense spending and rising Social Security outlays.

Investors are watching the direction of fiscal policy and Treasury supply-demand conditions as key drivers for interest rates and the dollar.