Deficit under $600 billion for first time since ’08
The White House said yesterday that the federal budget deficit will fall to $583 billion this year, the smallest deficit of President Obama’s tenure and the first to dip below $600 billion since the Great Recession took hold in 2008.
In its mid-year review of the nation’s finances, the White House predicted that the deficit for the fiscal year that ends in September will be about $66 billion lower than the administration forecast in February.
The improvement is driven primarily by sluggish rates of spending at the Pentagon and other federal agencies, particularly on recovery efforts for Hurricane Sandy. The administration also expects to spend less this year than previously forecast on health insurance subsidies for low-income families under the Affordable Care Act. The price of those subsidies is now predicted to be slightly higher, however, over the coming decade.
While the analysis brought good news for the short term, the outlook for the longer term was less rosy: The White House predicts that the nation’s finances will deteriorate markedly over the next decade, with deficits rising by nearly $600 billion.
The administration attributes the shift almost entirely to tax collections that are now expected to be sharply lower due to slower-than-expected economic growth in the next few years. After an unexpected 2.9 percent drop in gross domestic product in the first quarter of this year, the White House lowered its forecast to 2.6 percent growth in the current fiscal year. The administration has earlier predicted a 3.3 percent surge in GDP.
Officials at the White House Office of Management and Budget did not respond to requests for comment on the report, which was abruptly released yesterday afternoon without the standard warnings to reporters.
In a blog post, acting budget director Brian Deese highlighted the positive, noting that Obama has presided over “the most rapid sustained deficit reduction since World War II.”
When Obama took office in 2009, the economy was in freefall and the budget deficit was soaring toward $1.4 trillion, the first of four consecutive trillion-dollar deficits that drove the national debt to the highest level as a percentage of the economy since the end of World War II.
Since then, the economy has improved and Obama has signed off on painful but historic spending cuts under pressure from Republicans in Congress. Last year, the deficit fell to $680 billion. And after nearly three years of all-consuming budget battles, lawmakers heading into midterm elections have taken a break from the contentious work of deficit reduction - at least until next year, when new deadlines loom on the debt limit and automatic agency budget cuts known as the sequester.
Yesterday, Democrats hailed the new White House deficit forecast, which came on the same day as a separate Treasury Department announcement that the government actually recorded a surplus of $71 billion for the month of June.
“Today’s report .... shows once again that our fiscal outlook has improved significantly in the near-term,” Senate Budget Committee chairman Patty Murray, D-Wash., said in a written statement. “While we need to continue to tackle long-term deficits fairly and responsibly, we have room to focus on other deficits in areas like jobs, innovation, infrastructure, and education.”
Republicans, meanwhile, noted that the long-term outlook remains gloomy, with the national debt forecast to rise to more than $25 billion by 2024 if Obama’s policies are enacted.
Yesterday, the debt stood at $17.6 trillion.