Hill analysts lower 2015 budget deficit forecast to $426B

Congress’ official budget analyst projected Tuesday that this year’s federal deficit will drop to $426 billion, the lowest shortfall of Barack Obama’s presidency. The drop is expected to be followed by a steep rise, unless Congress acts to change budget circumstances, including a ten year outlook that isn’t substantially different from the last Congressional Budget Office report released in March. In two weeks, Congress returns to Washington from a summer break steering toward an autumn of budget clashes. Democrats are likely to argue that it shows planned GOP budget cuts are unnecessary, while the GOP is expected to say it demonstrates that action to tame deficits is needed now. The CBO in March forecast a deficit of $455 billion in 2016 and $486 billion in 2015.

The lower projection stems from higher-than -expected corporate and individual tax receipts, CBO said.

“I would caution those who would use this report as an opportunity to take these short-term savings and push for more spending”.

That would push the government’s total debt, accumulated over decades, to $27 trillion by 2025, or 77 percent of the country’s projected economic output that year. “If our nation is serious about balancing our budget and reducing America’s debt, real, substantive budget reforms and savings will have to be on the table during any spending negotiations”, the Wyoming Republican said in a statement. The agency reduced its estimated cumulative deficit between 2016 and 2015 by $769 billion.

Aside from the deficit projected to reach its smallest size since 2007, the economy is expected to grow at a faster pace, which means that so-called “slack” in the labor market will dissipate.

The agency also increased its forecast for 2016 economic growth, estimating an expansion of 3.1 percent measured fourth quarter to fourth quarter.

CBO’s latest deficit estimate is $59 billion lower than last year’s official deficit and would represent 2.4 percent of gross domestic product (GDP). But it said the economy “is now on firmer ground”, and projected that growth will return to around 3 percent annually in 2016 and 2017 before dipping again.

In a more pressing finding, the CBO said the government has room to stave off a debt limit breach through November or December, setting a new deadline for Congress to debate and pass a hike in the debt ceiling.