US budget deficit crucial threat to economy

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WASHINGTON, Feb 28 (Reuters): The massive US budget deficit is the gravest threat facing the economy, topping high unemployment and the risk of inflation or deflation, according to a survey of forecasters released on Monday. The National Association for Business Economics said its 47-member panel of forecasters increased its estimate for the 2011 federal deficit to $1.4 trillion from $1.1 trillion in its previous survey in November. "Panelists continue to characterise excessive federal indebtedness as their single greatest concern," with state and local government debt the second-biggest worry, the survey said. It was conducted between January 25 and February 9. The panel's deficit forecast is lower than the Obama administration projection of a record $1.65 trillion this fiscal year, or 10.9 per cent of US gross domestic product. Although the White House budget proposes $1.1 trillion in deficit reductions over 10 years, Republicans in the House of Representatives say that is not enough. Republicans are pressuring the administration to reduce spending by $61 billion by September, and the dispute threatens to shut down the government if Democrats and the White House refuse to go along. NABE panelists tweaked their previous stance on the Federal Reserve's decision to pump more money into the economy by buying government bonds.