WASHINGTON (MNI) - In the aftermath of the 2008 financial crisis and during the ensuing recession, reading a Congressional Budget Office report on the nation's budget outlook was as grim and gloomy as a winter's day in Brussels.
But beginning in February and especially since May, the darkness enveloping CBO fiscal reports has lifted and rays of sunshine are now visible.
But budget experts caution that while the short-term situation has brightened, ominous storm clouds still loom on the long-term horizon.
In its February budget and economic outlook report, the CBO said that if current spending and revenue laws remain, the fiscal year 2013 budget deficit would fall to $845 billion, or 5.3% of gross domestic product, the smallest since 2008.
The CBO said that this would be the first year in five years that an annual budget deficit fell below $1 trillion. It was about $1.1 trillion in FY'12.
The CBO said budget deficits would continue to dip over the next few years and fall to 2.4% of GDP by 2015, but it added that fiscal challenges remained.
"Deficits are projected to increase later in the decade in the coming decade, however, because of the pressures of an aging population, rising health care costs, and expansion of federal subsidies for health insurance, and growing interest payments on federal debt," it said.
The CBO projected ten-year cumulative budget deficits from FY'14 to FY'23 of $6.958 trillion.
In May, the CBO released its updated budget projections and this report jolted the fiscal debate. The CBO said the FY'13 deficit was now likely to "shrink" to $642 billion, or 4% of GDP, which would be less than half of the FY'09 deficit.
The CBO noted its FY'13 deficit estimate was about $200 billion than the one it made in February because of higher than expected revenues and an increase in payments to Treasury by Fannie Mae and Freddie Mac. For the FY'14 though FY'23 period, it projected cumulative deficits of $6.340 trillion, which is $618 billion less than its February estimates.
"That reduction results mostly from lower projections of spending for Social Security, Medicare, Medicaid and interest on the public debt," CBO said.
Since then, the CBO's monthly reports have been relatively upbeat. For example in the July monthly review, the CBO said the federal government's budget deficit for the first ten months of FY'13 was $606 billion which is almost $370 billion less than the deficit for the same period last year.
"The results through July suggest that total outlays and revenues for the fiscal year will both be slightly less than CBO projected in May when it estimated a deficit of $642 billion for the year," the CBO's July monthly report said.
Budget groups have reacted to the improving short-term fiscal news with caution.
When the CBO made its dramatically lower FY'13 deficit estimate in May, the Concord Coalition issued a statement saying that "a lower deficit is good news but hardly the end of the story."
"For the most part, it reflects a recovering economy and other factors that do not affect the long-term structural mismatch between spending and revenues," it added.
The Committee for a Responsible Federal Budget issued a statement in May that called the decline in deficits as "welcome news," but added that "lawmakers must not let this overshadow the importance of addressing the long-term trajectory of debt with a bipartisan budget plan. It's time for lawmakers to put their heads down, make the tough choices, and get the job done."
In the aftermath of the recent CBO reports, congressional Democrats have said they fiscal debate must shift from austerity to growth while Republicans have focused on the still dire long-term deficit and debt projections.
At a recent briefing, House Speaker John Boehner questioned the wisdom of celebrating annual deficits that are still very large.