The White House said on Monday that the federal budget deficit for the current fiscal year would shrink to US$759 billion. That is more than US$200 billion less than the administration predicted just three months ago.
The new figures reflect additional revenues generated by the improving US economy and take into account automatic, across-the-board spending cuts that US President Barack Obama’s administration had hoped to avert.
The 2013 budget year ending Sept. 30 will be the first one of Obama’s presidency in which the deficit will not exceed US$1 trillion. Obama inherited a struggling economy and record deficits.
As a percentage of the economy, the new deficit would be half the size of what it was when Obama entered office. At the time, he vowed to cut the deficit in half by the end of his first term, a pledge that took longer to fulfill.
The White House projected that economic growth would be slightly slower in the coming years than it forecast in April. The report said the automatic spending cuts that kicked in during March will slow down economic growth this year from the 2.6 percent increase it forecast for the fourth quarter of this year to a 2.4 percent increase.
However, the White House sees a slightly rosier jobs picture. It projects that unemployment will average 7 percent next year and reach 6.8 percent in the final quarter of next year. That is an improvement over the 7.2 percent unemployment it forecast in April as an average for next year.
A 2011 deficit-cutting deal with Republicans has cut deficits somewhat, as did a tax increase enacted earlier this year on upper-bracket earners.
Last year’s deficit registered about US$1.1 trillion. The White House earlier this year predicted this year’s deficit would be US$973 billion. The Congressional Budget Office (CBO) has an even more optimistic US$670 billion deficit projection for the year, and it would not be unusual for CBO’s figures to turn out to be more accurate.
White House budget director Sylvia Mathews Burwell said that this year’s deficit is less than half of the record deficit posted four years ago when measured against the size of the economy. This year’s deficit would equal 4.7 percent of GDP versus the 10.1 percent of GDP in 2009.
The White House economic forecasts are more optimistic than those projected by the CBO and by a poll of top business economists by the Blue Chip Economic Indicators. However, it is less upbeat than the projections of the US Federal Reserve. For instance, while the White House believes the annual average unemployment rate in 2015 will be 6.5 percent, the Fed has forecast an average jobless rate of between 5.8 percent and 6.2 percent.