WASHINGTON (MNI) - The Congressional Budget Office's updated budget report, which was released this week, has ignited statements of hope that the nation's fiscal problems are easing, but also warnings that it's far too soon for anyone to begin preparing to take a victory lap.
In its new report that updated deficit estimates since February, the CBO said it expects the fiscal year 2013 budget deficit to fall to $642 billion, sharply below the $845 billion it estimated in February, and dramatically lower than the $1.1 trillion deficit in FY'12.
"The decline in the projected deficit for 2013 stems largely from a boost in estimated revenues as well as from expected payments to the Treasury by Fannie Mae and Freddie Mac," the CBO said.
The CBO report shows markedly lower deficits over the entire decade than did its February report.
But the CBO emphasized the nation's fiscal challenges are far from over. "Budget shortfalls are projected to increase later in the coming decade, reaching 3.5% of GDP in 2023, because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt," the CBO report said.
In its report, the CBO estimates deficits of $560 billion in FY'14, $378 billion in FY'15, $432 billion in FY'16, $482 billion in FY'17, and $542 billion in FY'18. Looking further ahead, the CBO estimates deficits of $648 billion in FY'19, $733 billion in FY'20, $782 billion in FY'21, $889 billion in FY'22, and $895 billion in FY'23.
According to CBO, for the FY'14 through FY'18 period, the U.S. will have $2.39 trillion in total deficits and for the FY'14 through FY'23 period, the cumulative deficits will total $6.34 trillion.
In its February report, the CBO estimated cumulative deficits from FY'14 through FY'18 to be $2.66 trillion and $6.95 trillion for the FY'14 through FY'23 period.
Several budget groups have warned that the new CBO deficit estimates should not be taken as evidence that the U.S.'s fiscal challenges have changed in a fundamental way.
A report by the Committee for a Responsible Federal Budget said the CBO report shows a "significant improvement in debt levels" over the next decade but urged caution.
"Much of this improvement is due to short-term improvement that will change the level but not the trajectory of debt," the report said.
"We estimate that putting the debt on a clear downward path as a share of our economy will still require at least $2.2 trillion of deficit reduction relative to our CRFB Baseline over the next decade," it said.
The budget group said the nation has made progress in passing "substantial short-term and temporary deficit reduction," but said little has been done to respond to the drivers of deficits in the longer-term: growing health care costs, an aging population, and an outdated tax code.
"Whether policymakers replace or retain the sequester, a combination of new spending cuts, entitlement reforms and tax reforms will be needed to help support long-term economic growth and the put the debt on a clear downward path relative to the economy," the report concludes.
Bob Bixby, the executive director of the Concord Coalition, also warned against fiscal complacency.
"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," Bixby said in a statement.
On another fiscal matter this week, the House Appropriations Committee said that it will allocate $967 billion for discretionary programs in the 2014 fiscal year which is down from the $1.043 trillion level of FY'13.
The reduction is due to the continuing impact of the across-the-board spending cuts which began in March.
Senate Appropriations Committee Chairman Barbara Mikulski has said she will allocate $1.058 trillion for discretionary programs, thus assuming the across-the-board spending cuts are suspended.
--MNI Washington Bureau; tel: +1 202-371-2121; email: [email protected]