And while CBO revised its 10 year deficit projection downward by $618 billion, it still forecasts deficits totaling $6.3 trillion over the period, raising the debt to more than $25 trillion by 2023. In addition, some observers contend that the higher than expected revenue is illusory, because it’s in part due to one-time moves by wealthy taxpayers at the end of 2012 to avoid higher tax rates that take effect in 2013. CBO projects that after 2015 the deficit will begin to increase again due to the aging population, increased health care costs, and higher interest on the debt. The bad news is that the good news is only short term, and that the long-term fiscal situation is still of great concern. The ten year deficit would be $618 billion smaller than the February forecast, based primarily on lower projected spending in Medicare, Medicaid, Social Security, and interest on the debt. The new deficit projection would be equal to 4% of GDP, down from the earlier estimate of 5.3% of GDP, and is projected to shrink to only 2.1% of GDP by 2015. It should be noted that the new deficit projection is not based on the $85 billion in spending cuts mandated by the sequester, which were already incorporated into CBO’s February forecast. For the first seven months of the fiscal year, the FY13 deficit is down 32% from the same period last year. Then on Tuesday, CBO again revised its FY13 deficit projection, to $642 billion, a reduction of an additional $203 billion.ĬBO attributed the dramatic change in the deficit forecast to a healthier growing economy that, along with the January tax increases, has resulted in higher than expected individual and corporate tax revenue, and record profits by Fannie Mae and Freddie Mac, which translate into higher dividend payments to the Treasury. In February, the Congressional Budget Office (CBO) revised its FY13 deficit projection downward to $845 billion, the first time in five years that the deficit will fall below $1 trillion. Just last month, the House and Senate both passed budget resolutions, for the first time in five years. There have been a number of really positive developments on the budget and the economy over the last several months, mostly unexpected. This year’s federal budget deficit is shrinking, and shrinking faster than anyone had anticipated: surely this is good news.
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