The federal budget deficit will be 2.8 percent of gross domestic product this fiscal year, according to a Congressional Budget Office projection.
That would mark a decline in the deficit from 4.1 percent of the economy in fiscal 2013 and from 9.8 percent of GDP in fiscal 2009, the biggest gap in records dating to 1974.
In raw terms, the budget shortfall will be $492 billion in the current fiscal year — the 12-month period ending Sept. 30 — if laws governing taxes and spending don’t change, according to a CBO report released yesterday. The agency revised its fiscal 2014 deficit estimate down from a $514 billion projection in February.
“The Treasury’s coffers are swelling as the almost five-year economic expansion gains momentum, generating more corporate and personal income-tax revenue and reducing spending on social services,” Bloomberg’s Ian Katz reported yesterday.
Still, the deficit is projected to expand after 2015 “mainly because of the aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt,” the CBO report said.
“Such high and rising debt would have serious negative consequences” including a higher “risk of a fiscal crisis in which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates,” the report said.
For more about the CBO report, including reaction from the White House and Republican leaders, see this story by Bloomberg’s Derek Wallbank.