U.S. deficit cut almost one-third to $492 billion, CBO says

WASHINGTON – The U.S. government’s deficit will fall to $492 billion this year, according to the Congressional Budget Office, a steeper drop than originally predicted from $680 billion in fiscal year 2013.

The 2014 deficit will be 2.8 percent of the economy, according to CBO, almost 32 percent below fiscal year 2013, when it was 4.1 percent. The deficit will shrink again in fiscal 2015 to $469 billion, before rising to about $1 trillion in fiscal years 2022 to 2024, CBO said.

“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,” CBO said in a report released Monday. The 2.8 figure as a percentage of gross domestic product is lower than the 3.1 percent average of the last 40 years, CBO said.

President Barack Obama has often pointed to the declining deficit in making the case for his economic program, including greater spending on infrastructure and other items. Republicans who have called for deeper cuts to balance the budget.

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CBO revised its projection from $514 billion in February, “mostly because the agency now anticipates lower outlays for discretionary programs and net interest payments,” the office said. The 20-page report is an update of CBO’s 10-year baseline projections released in February.

Rising deficits

Deficits will rise sharply after next year, CBO said. Cuts to discretionary spending on programs such as military defense and national parks will be more than offset by a rise in health care and Social Security costs, as the baby boomer generation ages into retirement, as well as higher interest payments on the national debt.

The looming spike will boost Republicans who have urged additional cuts. The House last week adopted a budget written by Budget Committee Chairman Paul Ryan, a Wisconsin Republican, that aims for balance within 10 years from steep cuts while increasing military spending.

“If current laws do not change, the period of shrinking deficits will soon come to an end,” CBO said.

U.S. stocks rebounded from the worst weekly losses in two years after data showed retail sales increased the most since 2012.

The Standard and Poor’s 500 Index rose 0.9 percent to 1,832.19 at 11:32 a.m. in New York after sliding 2.6 percent last week, the biggest drop since June 2012. The Dow Jones Industrial Average gained 116.69 points, or 0.7 percent, to 16,143.44 on Monday. The Nasdaq Composite Index added 1.2 percent.

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