The U.S. government’s deficit will fall to $492 billion this year, according to the Congressional Budget Office, a steeper drop than originally predicted from $680 billion in fiscal year 2013.
The 2014 deficit will be 2.8 percent of the economy, according to CBO, almost 32 percent below fiscal year 2013, when it was 4.1 percent. The deficit will shrink again in fiscal 2015 to $469 billion, before rising to about $1 trillion in fiscal years 2022 to 2024, CBO said.
“This will be the fifth consecutive year in which the deficit has declined as a share of GDP since peaking at 9.8 percent in 2009,” CBO said in a report released today. The 2.8 figure as a percentage of gross domestic product is lower than the 3.1 percent average of the last 40 years, CBO said.
President Barack Obama has often pointed to the declining deficit in making the case for his economic program, including greater spending on infrastructure and other items. Republicans have called for deeper cuts to balance the budget.
CBO revised its projection from $514 billion in February, “mostly because the agency now anticipates lower outlays for discretionary programs and net interest payments,” the office said. The 20-page report is an update of CBO’s 10-year baseline projections released in February.
White House spokesman Jay Carney noted the report and a separate one CBO released showing that the 2010 health care law will cost $104 billion less than expected over the next decade. That law, Carney said, is “making historic progress in slowing health care cost growth and improving our nation’s fiscal outlook by lowering deficits.”
Deficits will rise sharply after next year, CBO said. Cuts to discretionary spending on programs such as military defense and national parks will be more than offset by a rise in health care and Social Security costs, as the baby boomer generation ages into retirement, as well as higher interest payments on the national debt.
“If current laws do not change, the period of shrinking deficits will soon come to an end,” CBO said.
The looming spike will boost Republicans who have urged additional cuts. The House last week adopted a budget written by Budget Committee Chairman Paul Ryan, a Wisconsin Republican, that aims for balance within 10 years from steep cuts while increasing military spending.
“President Obama opposes any effort to reduce the deficit, and proposes policies that would dramatically increase the deficit, so it is bizarre to watch a White House spokesperson hail lower deficit numbers,” Rory Cooper, spokesman for House Majority Leader Eric Cantor, a Virginia Republican, said in an e-mail.
The Standard & Poor’s 500 Index pared gains today while the Nasdaq Composite Index erased its advance after U.S. stocks had their worst weekly losses in two years.
The S&P 500 rose 0.3 percent to 1,821.51 at 3:04 p.m. in New York. The U.S. equity benchmark slid 2.6 percent last week, the biggest drop since June 2012. The Dow Jones Industrial Average gained 70.66 points, or 0.4 percent, to 16,118.33 today. The Nasdaq Composite was little changed around the 4,000 level.