The US Congressional Budget Office (CBO) has announced that the government deficit is expected to shrink to almost a third of its 2013 value this year. The deficit is also expected to continue shrinking into 2015, before rising again by 2024.
According to the budget, the deficit will drop to 2.8 percent of the economy in 2014 – 32 percent lower than results for the previous year.
“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 said in the report. The reduction this year will also be larger than previously expected.
Deficits have been shrinking drastically over the past five years, partly due to a recovering economy, and partly because of cuts to future spending and changes to tax policies
The CBO is a non-partisan agency that provides advice for Congress on budget policy. According to its calculations, the 2014 deficit will drop to $492bn, $23bn less than the same agency had calculated two months ago. If estimates are correct, this will be the US’s smallest deficit since 2007.
“Though projected revenues are slightly below the amounts that were previously reported, projected outlays have dropped by more, largely because of lower subsidies for health insurance under the Affordable Care Act.”
Deficits have been shrinking drastically over the past five years, partly due to a recovering economy, and partly because of cuts to future spending and changes to tax policies. Since the 1980s the budget deficit has averaged at about 3.2 percent.
The CBO has also reviewed their estimates for the ten-year deficit, to 2024. The agency expects it to be up to $286bn lower than previously though, or close to $7.6trn. Savings are largely connected to the reviewed healthcare subsidies. The CBO concluded that deficits will begin to widen again as early as 2016, and will peak at about $1trn between 2022 and 2024.
According to the report, the US government will spend $3.523trn this year- 20.4 percent of the GDP. Most of the spending is earmarked for military expenditure as well as Medicare, Social Security and Medicaid.
However, though the deficit is shrinking, government debt ratio is approaching record highs at 73.8 percent of GDP. It has been increasing sharply over the past six years as government revenues plummets in the wake of the global financial crisis.
