The Obama administration lowered its 2014 deficit forecast to $583 billion, the smallest in five years, and projected slower economic growth than seen four months ago.
In its mid-session budget update, the White House Office of Management and Budget projected this year’s deficit will be $66 billion less than its estimate on March 4.
The shortfall is estimated at $525 billion next year, compared with $564 billion expected in early March.
The review provides President Barack Obama with evidence to bolster the pitch he’s making to voters that the economy is improving even as the recovery has been uneven for many lower-and middle-income Americans. He also is seeking to win support for spending on infrastructure and education by arguing that shrinking deficits show the nation can afford such programs.
The administration said it expects the U.S. economy to grow 2.4 percent this year, down from 3.1 percent seen in March, with a 3.5 percent increase next year.
The median forecast of 89 analysts surveyed by Bloomberg is for a 1.7 percent gain in the economy for all of 2014, and a 3 percent increase in 2015.
The updated forecast, completed in early June, mostly reflects the outlook presented in the 2015 budget released in March with “modifications to account for a decline in the gross domestic product during the first quarter of 2014, the rapid drop in the unemployment rate since the budget economic forecast was finalized in November, a reassessment of projected interest rates and other factors,” the report said.
The report gives an optimistic picture for growth in the world’s largest economy, as job growth accelerates to bring the unemployment rate down from its peak of 10 percent in October 2009 to 6.1 percent in June.
“The housing market has also begun to contribute to the recovery,” the administration said. “The steep decline in residential investment ended in 2010, and housing starts and home prices have rebounded over the past three years.”
The revised forecasts assume that Obama’s budget for increased spending on employment, education and job-training programs, financed by reduced tax breaks for upper-income families and some businesses will be approved by Congress.
That’s unlikely to happen as Democrats and Republicans are at loggerheads over spending with the midterm congressional elections four months away.
In appearances this week in Colorado and Texas, Obama gave a pep talk on the U.S. economy and blamed congressional Republicans for the “screwed up” legislative stalemate in Washington.
“By almost every measure, we are better off now than we were when I took office,” Obama said yesterday in Austin. “We’ve still got a long way to go.”
Obama has yet to sign any of the 12 annual spending bills needed to keep the government open after Sept. 30. The House, controlled by Republicans, has passed six bills, while disputes over amendments have kept the Senate, where Democrats hold a majority, from acting on any of the measures.
Lawmakers may pass a stopgap measure to keep the government functioning through the November elections, potentially affecting the projections released today.
The White House estimates the unemployment rate for 2014 will average 6 percent, down from 6.9 percent forecast in March. The revised jobless rate for next year was put at 5.7 percent, compared with 6.4 percent expected in March.
Revised deficit forecasts show shrinking in absolute terms and as compared with the size of the economy. The deficit-to-gross domestic product ratio this year is projected at 3.4 percent, down from 3.7 percent estimated in March. Administration economists expect it will represent 2.9 percent of the economy next year.
The deficit amounted to 10.1 percent of GDP when Obama took office in 2009.
The nonpartisan Congressional Budget Office is scheduled to issue its revised forecast for economic growth, deficits and unemployment on July 15.