The government’s budget deficit will drop to $583 billion this year, the lowest level of President Barack Obama’s tenure, the White House said Friday.
Last year’s deficit was $680 billion. The latest update from the White House budget office is also $66 billion less than the administration predicted earlier this year when releasing the president’s budget, and comes the day after the government announced it had recorded its first four-month net surplus since 2007.
Obama presided over trillion-dollar-plus deficits during his first term as the economy struggled to recover from a deep recession and financial crisis. Attempts to strike deals on spending cuts and revenue increases with GOP leaders have failed, though Obama was successful in winning a tax increase on wealthier earners in early 2013. Tighter annual agency budgets are also responsible for lower deficits, as well as rising tax revenues from businesses as the economy gains momentum.
The nonpartisan Congressional Budget Office projects an even lower deficit of $492 billion for the budget year ending Sept. 30.
“Under the president’s leadership, the deficit has been cut by more than half as a share of the economy, representing the most rapid sustained deficit reduction since World War II, and it continues to fall,” said acting White House budget director Brian Deese. “At the same time, our economy is moving forward and businesses are creating jobs. Businesses have added nearly 10 million new jobs over the past 52 months.”
However, the CBO has warned that the low deficits are likely to vanish quickly in the second half of the decade, rising to $1 trillion or more in 2022. The reason: benefits for the aging population, rising health care costs, an expansion of federal subsidies for health insurance and interest payments on the still-growing federal debt.
The White House has also lowered its economic growth forecast for the current year to 2.6 percent, reflecting the unexpected 2.9 percent drop in gross domestic product in the first quarter of this year when unusually severe weather dinged the economy. Its earlier prediction was for a 3.3 percent hike in GDP.
The CBO projects unemployment to drop to 6 percent by the end of the year, for an average 6.3 percent for the year. The jobless rate in June was 6.1 percent, the lowest since 2008. It also projects that the average unemployment rate for 2015 will be 5.7 percent and then stabilize at 5.4 percent in 2017, a year and a half earlier than the budget office anticipated just months ago.
Obama’s budget released in March called for a variety of tax increases and promised new help for the working poor and additional money for road-building, education and research. It also pulls back from controversial cuts to Social Security cost-of-living increases that had angered Democrats.
The Treasury Department announced that the government ran a surplus of $71 billion for the month of June.
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