WASHINGTON: The US deficit is shrinking considerably more quickly than previously thought, the congressional budget office said in a report that could sap congress’ sense of urgency to find further budget savings.
In one fell swoop, the non-partisan budget referee slashed its deficit forecast for the current fiscal year by US$203bil from estimates made in February to US$642bil making it the smallest budget shortfall since 2008.
The CBO said the deficit will fall to US$378bil by 2015 with no congressional action a sharp contrast to the US$1 trillion recession-driven deficits in each of President Barack Obama’s first four years in office.
The revisions are driven largely by rising tax revenue from individuals and corporations as the economy sputters back to life. They also reflect stronger contributions to US Treasury coffers from government-run mortgage finance groups Fannie Mae
and Freddie Mac.
”Because revenues, under current law, are projected to rise more rapidly than spending in the next two years, deficits in CBO’s baseline projections continue to shrink, falling to 2.1% of GDP by 2015,” the CBO said in its report.
That level is considered easily sustainable by budget analysts, who said the report will blunt Republican arguments that rising federal debt levels will soon crush the economy.
”I would say that removes any sense of crisis, and the risk is that Washington starts to get complacent,” said Greg Valliere, chief political strategist at Potomac Research Group, an investment advisory firm in Washington. “It does change the psychology in this town.” – Reuters