The federal budget deficit will fall in 2015, the sixth consecutive year of decreases relative to the overall economy, according to new figures by the Congressional Budget Office. The office also says the U.S. economy will expand at a “solid pace” over the next few years.
The estimate for 2015 stands at $468 billion, a modest improvement on the 2014 budget deficit of $483 billion. Both numbers are solid improvements over the $680 billion shortfall that was recorded in 2013.
But as is often the case with economic news, the picture isn’t completely sunny. The main problem is the overall federal debt, which the nonpartisan CBO notes is already at historically high levels when measured against the U.S. economy.
From the budget agency:
“CBO expects that federal debt held by the public will amount to 74 percent of GDP at the end of this fiscal year — more than twice what it was at the end of 2007 and higher than in any year since 1950 (see figure below). By 2025, in CBO’s baseline projections, federal debt rises to nearly 79 percent of GDP.”
As you’ll recall, U.S. debt levels soared in the early years of the economic crisis, as the government spent money to try to cope with the crisis even as revenues plummeted. In 2009, for instance, the budget deficit stood at 9.8 percent of the U.S. GDP; this year, it’s projected to be 2.6 percent.
While the next few years could be relatively smooth for the U.S. economy, the CBO says several elements will challenge the budget over the next 10 years:
“The aging of the population, the rising costs of health care, and the expansion in federal subsidies for health insurance that is now under way will substantially boost federal spending on Social Security and the government’s major health care programs relative to GDP over the next 10 years.”