by Bill McBride on 4/14/2014 11:00:00 AM
Monday, April 14, 2014
The Congressional Budget Office (CBO) released their new Updated Budget Projections: 2014 to 2024. The projected budget deficits have been reduced for each of the next ten years, and the projected deficit for 2014 has been revised down from 3.0% to 2.8%.
From the CBO:
As it usually does each spring, CBO has updated the baseline budget projections that it released earlier in the year. CBO now estimates that if the current laws that govern federal taxes and spending do not change, the budget deficit in fiscal year 2014 will be $492 billion. Relative to the size of the economy, that deficit—at 2.8 percent of gross domestic product (GDP)—will be nearly a third less than the $680 billion shortfall in fiscal year 2013, which was equal to 4.1 percent of GDP. This will be the fifth consecutive year in which the deficit has declined as a share of GDP since peaking at 9.8 percent in 2009.The CBO projects the deficit will decline further in 2015, and be below 3% of GDP through fiscal 2018. Then the deficit will slowly increase.
CBO’s estimate of the deficit for this year is $23 billion less than its February estimate, mostly because the agency now anticipates lower outlays for discretionary programs and net interest payments. The projected cumulative deficit from 2015 through 2024 is $286 billion less than it was in February.
But if current laws do not change, the period of shrinking deficits will soon come to an end. Between 2015 and 2024, annual budget shortfalls are projected to rise substantially—from a low of $469 billion in 2015 to about $1 trillion from 2022 through 2024—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.
Click on graph for larger image.
This graph shows the actual (purple) budget deficit each year as a percent of GDP, and an estimate for the next ten years based on estimates from the CBO.
After 2015, the deficit will start to increase again according to the CBO.