The Congressional Budget Office on Wednesday provided the Obama administration with another piece of positive economic news in advance of the Nov. 4 mid-term election – with a report showing that the federal government ended the fiscal year Sept. 30 with the smallest budget deficit since 2008.
The deficit for fiscal 2014 totaled $486 billion – a fraction of the trillion dollar a year deficits that haunted the administration in the early going of the financial crisis and recession, and $195 billion less than the budget shortfall recorded in fiscal 2013.
The CBO report comes on the heels of last Friday’s Labor Department report that employers added 248,000 jobs in September and that the unemployment rate had dipped to 5.9 percent, the lowest level since July 2008.
As a measure of the overall economy, the fiscal 2014 deficit equals 2.8 percent of the Gross Domestic Product – or slightly below the average experience over the past four decades. Moreover, this marks the fifth year in a row in which the deficit declined as a percentage of GDP since peaking at 9.8 percent in 2009.
Although the new deficit number won’t be official until it is confirmed by the Treasury later this month, CBO credited the new $486 billion projection to federal revenues growing much faster than spending. Tax receipts grew nearly 9 percent from the previous year to $3.013 trillion, while outlays were up just 1.4 percent to $3.499 trillion.
The CBO has forecast a $469 billion deficit for fiscal 2015, which began Oct. 1, and says the deficit will begin to rise again later in the decade as more and more Baby Boomers retire and the cost of Social Security, Medicare and other entitlement programs begin to skyrocket.
For now, however, the deficit has faded as a concern of the White House and congressional leaders – even while budget hawks and government spending watchdogs warn about looming deficit problems.
During an appearance on Tuesday at the Peterson Institute for International Economics, Treasury Secretary Jack Lew commented that deficit reduction “is not as urgent a priority as it was a few years ago.”
“It’s a good thing for the fiscal debates to take a little bit of back seat and simmer down,” he added.
Senate Budget Committee Chair Patty Murray (D-WA), a liberal Democrat who helped negotiate last year’s two-year budget deal with House Budget Committee Chairman Paul Ryan (R-WI), said in a statement that: “Today’s announcement from the Congressional Budget Office on the deficit for fiscal year 2014 offers more evidence that our fiscal outlook has continued to improve.”
She said that “With a strengthened fiscal outlook in the near and medium term, we have the opportunity to focus on our other growing deficits in job-creating areas like education, infrastructure, and innovation while finding ways to tackle our long-term debt, including ending special tax breaks for the biggest corporations and continuing to work to bend the health care cost curve responsibly without shifting costs onto seniors and families.”
However, the Committee for a Responsible Federal Budget, a deficit watchdog group, cautioned in a statement that “Unfortunately, the recent fall in deficits is not a sign of fiscal sustainability.”
Even as deficits have fallen, the group said, debt has continued to rise, more than doubling as a percent of GDP since 2007 to record levels not seen other than during a brief period around World War II. “Both deficits and debt are projected to rise over the next decade and beyond, with trillion-dollar deficits returning by 2025 and debt exceeding the size of the economy before 2040, and as soon as 2030,” the group said.
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