US Budget Deficit to Fall Below $1 trillion This Year: Report
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The nonpartisan Congressional Budget Office said it projects the federal deficit will total $845 billion this year, a modest improvement compared to last year’s $1.1 trillion. However, the CBO warned that national debt will deepen and swell to unsustainable levels through 2023 unless lawmakers take remedial action.
On Tuesday, the CBO projected that the economy will grow just 1.4 percent this year, hindered by the tax rise on incomes over $400,000 passed January as well about $85 billion in automatic spending cuts due to take effect from March 1.
The nonpartisan Congressional Budget Office said it projects the federal deficit will total $845 billion this year, a modest improvement compared to last year’s $1.1 trillion. However, the CBO warned that national debt will deepen and swell to unsustainable levels through 2023 unless lawmakers take remedial action.
On Tuesday, the CBO projected that the economy will grow just 1.4 percent this year, hindered by the tax rise on incomes over $400,000 passed January as well about $85 billion in automatic spending cuts due to take effect from March 1.
After this year, economic growth will speed up, CBO projects, causing the unemployment rate to decline and inflation and interest rates to eventually rise from their current low levels.
Nevertheless, the unemployment rate is expected to remain above 7.5 percent through next year, making 2014 the sixth straight year above that level, the longest period of such high unemployment in 70 years, the report said.
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[quote]For the first time since President Barack Obama took office, a combination of budget cuts and economic growth will pare the deficit to the below $1 trillion at $845 billion this year. By 2015, the gap is expected to fall to $430 billion, or 2.4 percent of GDP, a level that many economists view as sustainable.[/quote]
However, the long-term budget outlook remains grim, said the CBO. As more and more baby boomers retire and claim Medicare and Social Security and as Obama’s healthcare law takes effects, the agency forecasts the government will rack up at least $7 trillion in deficits over the next decade, pushing the publicly held debt up to almost $20 trillion by 2023, or 77 percent of GDP.
“Such a large debt would increase the risk of a financial crisis, during 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,” CBO said.
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Republicans seized upon the report as evidence that too-high deficits and debt are a drag on the economy and could eventually precipitate a fiscal crisis like many European countries are experiencing.
“The CBO’s report is yet another warning that we need to get spending under control. The deficit is still unsustainable,” Paul Ryan, the House Budget Committee Chairman and former Republican vice presidential candidate, said in a statement. “By 2023, our national debt will hit $26 trillion. We can’t let that happen. We need to budget responsibly, so we can keep our commitments and expand opportunity.”
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