WASHINGTON — For the first time in five years, the federal budget deficit will come in under $1 trillion in 2013, congressional budget analysts said Tuesday, with the gap between taxes and spending falling to $845 billion in the fiscal year that ends in September.
Attributed in large part to tax hikes adopted on Jan. 1 and deep automatic spending cuts set to hit next month, new projections from the nonpartisan Congressional Budget Office show the deficit continuing to plummet in 2014 and 2015, and falling to less than 3 percent of the overall economy for much of this decade.
The national debt would stabilize to around 77 percent of the economy after years of rampant borrowing to fight the worst recession since the 1930s, the CBO said. However, deficits will begin climbing again as a percentage of the economy by 2019, the CBO said, as an aging population drives spending on Social Security, Medicare and Medicaid ever higher.
“The CBO outlook makes it clear that, while we still have more work to do, the $2.4 trillion in deficit reduction we enacted over the last two years has moved us closer to stabilizing the debt and responsibly scaling back the deficit,” Senate Budget Committee Chairman Patty Murray, D-Wash., said in a statement. “We need to continue working to cut spending responsibly, protect and strengthen programs like Medicare, and raise revenue by closing tax loopholes that the wealthiest Americans and biggest corporations take advantage of.”
“Although relative stability in the debt as a share of GDP over the next 10 years would be a welcome development after its sharp upward surge during the past several years, the projected path of the federal budget remains a significant concern,” the report says.
The report lists several reasons for additional action to restrain borrowing: First, the debt is “very high by historical standards,” larger as a percentage of the economy than at any time in the nation’s history except for World War II, which “poses an increased risk of precipitating a fiscal crisis.”
Second, CBO projections may understate the trajectory of the nation’s indebtedness if lawmakers fail to achieve debt-reduction targets set during the budget battles between President Barack Obama and congressional Republicans over the past two years.
If lawmakers delay or cancel automatic spending cuts known as the sequester, for example, the outlook would darken significantly. And even if the sequester remains in place, budget caps adopted during the 2011 debt-limit fight would require lawmakers to reduce agency spending to 5.8 percent of GDP in 2023 — the lowest level since at least 1962, when such data were first recorded.
Third, the cost of federal health programs — though slowing in recent years — continues to rise rapidly, as does the cost of Social Security. “Unless laws governing those programs are changed — or the increased spending is accompanied by corresponding reductions in other spending, sufficiently higher tax revenues, or a combination of both” — debt will rise sharply, the report says, after 2023.
While the nation’s budget picture has improved somewhat, the CBO said the economic outlook is mixed, with sluggish growth forecast through the rest of this year. The jobless rate, meanwhile, is projected to remain above 7.5 percent through the end of 2014, marking the sixth consecutive year above that level — “the longest such period in the past 70 years.”