Hill analysts project lowest budget deficit of Obama years, but see worsening

As the stock market began recovering from its “Black Monday” upheaval, the non-partisan Congressional Budget Office released a soothing report on Tuesday projecting that this year’s budget deficit will be even smaller than previously thought and that the U.S. economy is on track to grow by a healthy 3.1 percent in 2016.

The CBO said it now estimates a $426 billion deficit for fiscal year 2015, down from its $486 billion forecast made in March.

The Republican-led Congress has approved a blueprint that uses spending curbs on Medicare, Medicaid and other programs to claim a balanced budget in a decade, a plan Democrats have derided as harsh and unrealistic.

The federal budget deficit is expected to be reduced by $59 billion this year compared to last, totaling an estimated $426 billion. It also forecast a fiscal 2016 deficit of $414 billion, a reduction of $41 billion from the previous 2016 estimate.

The CBO also revised its forecast for real gross domestic product growth for 2015 to 2.3 percent from 2.8 percent, bringing it in line with private forecasters.

Republican Mike Enzi of Wyoming, chairman of the Senate Budget Committee, attributed the falling deficit to spending caps put in place as part of negotiations over the federal debt ceiling.

It would also mean that this year’s shortfall would be 2.4 percent the size of the overall economy, a proportion that many economists consider acceptable. “I would caution those who would use this report as an opportunity to take these short term-savings and push for more spending”.

“We still predict, as we have for several months, that November or December seems the likely time frame within which Treasury will no longer be able to borrow money from other government sources and will have to resort to day-to-day receipts in order to pay government bills”, Steve Bell, senior director of economic policy at BPC, said.

Congress has fought frequently over extending the debt limit, with an unprecedented federal default a potential outcome should the parties deadlock.

According to The Hill, lawmakers are already well aware of the situation, having been warned before their summer recess by Treasury Secretary Jack Lew that the debt issue could need to be resolved by the end of October.