U.S. deficit to fall to $514 billion in 2014, budget agency says

WASHINGTON – The U.S. will post the narrowest budget deficit this year as a share of the economy since 2007 as stronger growth helps boost tax revenue, according to the Congressional Budget Office.

The deficit will decline to $514 billion this fiscal year from $680 billion in 2013 before surging to $1.074 trillion in a decade, according to the Congressional Budget Office.

A stronger economy, lower unemployment, higher tax revenue and payments from mortgage-finance companies Fannie Mae and Freddie Mac are helping the U.S. narrow the gap from the 2009 record shortfall of $1.4 trillion.

“The federal budget deficit has fallen sharply during the past few years, and it is on a path to decline further this year and next,” CBO said in a report released today in Washington. “After that, however, deficits are projected to start rising – both in dollar terms and relative to the size of the economy.”

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A suspension of the federal debt limit, enacted by Congress in October, is scheduled to expire Feb. 7. Treasury Secretary Jacob J. Lew has repeatedly urged Congress to act quickly to raise the cap, saying the government’s ability to meet its obligations will run out before the end of this month.

The 2014 deficit will shrink to 3 percent of the economy, according to the CBO, which said the gross domestic product will expand 3.1 percent in the fourth quarter of 2014 from the same period last year.

The U.S. economy grew at a 3.2 percent pace in the fourth quarter of 2013 as Americans’ spending climbed the most in three years, laying the ground for further improvement this year. For all of 2013, the economy expanded 1.9 percent.

Jobless rate

The unemployment rate fell to 6.7 percent in December, a five-year low, as people left the labor force.

The CBO said it expects the jobless rate will be at 6.7 percent in the fourth quarter of 2014 and 6.3 percent in the fourth quarter of 2015.

The long-term budget outlook remains less favorable, CBO said. Annual deficits will exceed $1 trillion again starting in 2022 to reach $1.074 trillion, or 4 percent of GDP, in 2024. That will push the publicly held debt to $21.3 trillion or 79.2 percent of GDP by 2024, it said.

CBO attributed the long-term debt increase to an aging population and rising costs of health care.

A fight over raising the debt limit contributed to a 16-day partial government shutdown in October. House Republicans tried unsuccessfully to attach policy provisions curbing the health care law and promoting the Keystone XL pipeline in exchange for raising the debt cap and funding the government.

Without conditions

President Barack Obama and Senate Democrats insist they won’t negotiate on the debt limit increase this time. Senator John Thune of South Dakota, the third-ranking Republican, said his party probably will provide enough votes to pass an increase in that chamber without conditions.

Lew said yesterday the U.S. economy is “poised for growth in 2014” and Congress should avoid another “manufactured crisis” over the debt ceiling. He spoke at the Bipartisan Policy Center in Washington.

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