Economic And Budget Outlook Fiscal Years 1988 1992

The downturn in the economy and record outlays required to resolve failed banks and savings and loans will push the federal deficit near $300 billion in 1991. Not included in this estimate, but sure to add to it, are the costs of Operation Desert Storm. After 1991, as these factors begin to fade and as the savings from last year's budget agreement grow, the budgetary picture should brighten. By 1995, assuming that the new legal limits on discretionary spending are maintained, the Congressional Budget Office (CBO) projects that the total federal deficit will fall below $100 billion for the first time in 15 years and below 1 percent of gross national product (GNP) for the first time in 20 years. CBO's budget projections assume that the U.S. economy is now in a brief recession, which will continue into the spring. After that, the prospects for a solid recovery with low inflation are good. Real GNP is projected to be flat in 1991 (on a year-over-year basis) and to grow by about 3 percent a year in 1992 through 1996.