The U.S. federal budget deficit has fall sharply during the past few years, and according to the Congressional Budget Office, “it is on a path to decline further this year and next year..”
The deficit will total $514 billion in fiscal year 2014, compared with $1.4 trillion in 2009.
That according the the CBO’s estimates under budgets in current law. At that level, this year’s deficit would equal 3.0 percent of the nation’s economic output, or gross domestic product (GDP)—close to the average percentage of GDP seen during the past 40 years.” The Congressional Budget Office has recently underestimated the reduction in the deficits Last year the CBO projected the government would carry a deficit of $901 billion dollars but in fact it only turned out to be $680 billion.
This good news may be short lived as in the same report Douglas Elmendorf, director of the Congressional Budget Office stated: “After that (2015), however, deficits are projected to start rising—both in dollar terms and relative to the size of the economy—because revenues are expected to grow at roughly the same pace as GDP whereas spending is expected to grow more rapidly than GDP. In CBO’s baseline, spending is boosted by the aging of the population, the expansion of federal subsidies for health insurance, rising health care costs per beneficiary, and mounting interest costs on federal debt.”
Mr. Elmendorf brings up excellent points about how a lack in legislative changes will make the deficit reduction short lived. Some of the legislative changes include immigration reform which could reduce the deficit another 2.5 trillion dollars over the next 10 years, and raising the cap on social security tax which is currently at $117,000.