CBO: Deficit to shrink to lowest level of Obama presidency
WASHINGTON – Solid economic growth will help the federal budget deficit shrink this year to its lowest level since President Barack Obama took office, according to congressional estimates released Monday.
The Congressional Budget Office also projects a 14 percent drop in the number of U.S. residents without health insurance, largely because of Obama’s health law.
In a report released Monday, CBO said the deficit will be $468 billion for the budget year that ends in September. That’s slightly less than last year’s $483 billion deficit.
The official scorekeeper of Congress projects solid economic growth for the next few years, with unemployment dropping slightly.
“In CBO’s estimation, increases in consumer spending, business investment and residential investment will drive the economic expansion this year and over the next few years,” the report said.
CBO also cited wage increases, rising wealth and the recent decline in oil prices.
For future years however, CBO issued a warning: Beyond 2018, deficits will start rising again as more baby boomers retire and enroll in Social Security and Medicare. By 2025, annual budget deficits could once again top $1 trillion, unless Congress acts.
At that point, Social Security benefits would account for one-quarter of all federal spending, said CBO Director Douglas Elmendorf.
“The underlying point is that we have a handful of very large federal programs that provide benefits to older Americans,” Elmendorf said. “And with the rising number of older Americans and a rising cost of health care, those programs get much more expensive.”
CBO said the number of U.S. residents without health insurance will drop from 42 million last year to 36 million this year, largely because of Obama’s health law. These numbers don’t include people who are in the U.S. illegally, who are ineligible for subsidies under the health law.
The report said 19 million people will have health insurance because of the law, which could make it harder for congressional Republicans to make good on promises to repeal it.
Obama inherited an economy in recession when he took office. The annual deficit topped $1 trillion for each of his first four years in office, including a record $1.4 trillion in 2009.
As a share of the economy, CBO said this year’s deficit will be slightly below the historical average of the past 50 years.
The federal budget deficit became a big issue during Obama’s early years in office. In 2011, Obama and congressional Republicans struck a deal that resulted in significant spending cuts at many government agencies. At the start of 2013, Obama persuaded Congress to further address the deficit by raising taxes on top earners.
The White House said Monday that Congress still has more to do. “CBO’s longer-term budget and economic projections confirm the need for Congress to act to strengthen our economy for the middle class while putting our debt and deficits on a sustainable trajectory, including by making the investments that will accelerate economic growth and generate good new jobs for our workers to fill,” Deputy Press Secretary Eric Schultz said in a statement.