Federal deficit to dip below $600B for first time since recession
WASHINGTON — The White House said Friday that the federal budget deficit will fall to $583 billion this year, the smallest deficit of President Barack Obama’s tenure and the first to dip below $600 billion since the Great Recession took hold in 2008.
In its mid-year review of the nation’s finances, the White House predicted that the deficit for the fiscal year that ends in September will be about $66 billion lower than the administration forecast in February.
The improvement is driven primarily by sluggish rates of spending at the Pentagon and other federal agencies, particularly on recovery efforts for Hurricane Sandy. The administration also expects to spend less this year than previously forecast on health insurance subsidies for low-income families under the Affordable Care Act. The price of those subsidies is now predicted to be slightly higher, however, over the coming decade.
While the analysis brought good news for the short term, the outlook for the longer term was less rosy: The White House predicts that the nation’s finances will deteriorate markedly over the next decade, with deficits rising by nearly $600 billion compared with previous projections.
The administration attributes the shift almost entirely to tax collections that are now expected to be sharply lower due to slower-than-expected economic growth in the next few years. After an unexpected 2.9 percent drop in gross domestic product in the first quarter of this year, the White House lowered its forecast to 2.6 percent growth in the current fiscal year. The administration has earlier predicted a 3.3 percent surge in GDP.
Officials at the White House Office of Management and Budget did not respond to requests for comment on the report, which was abruptly released Friday afternoon without the standard warnings to reporters.
In a blog post, acting budget director Brian Deese highlighted the positive, noting that Obama has presided over “the most rapid sustained deficit reduction since World War II.”