CBO Increases 2016 Deficit Forecast to $544B

The U.S government budget deficit that the CBO is currently projecting is $130 billion higher than the one that the agency projected in August.
Matthew HellerJanuary 19, 2016

The Congressional Budget Office has raised its projected U.S. budget deficit estimate for 2016 to $544 billion, reflecting in large part the fiscal impact of extended tax breaks.

The deficit that the CBO is currently projecting is $130 billion higher than the one that the agency projected in August. At 2.9% of GDP, the expected shortfall will mark the first time that the deficit has risen in relation to the size of the economy since peaking at 9.8% in 2009.

“If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years,” the CBO said in a report released Tuesday.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

“Debt held by the public would also grow significantly from its already high level,” it added.

According to the CBO, about $43 billion of this year’s increase in the deficit will result from a shift in the timing of some payments that the government would ordinarily have made in fiscal year 2017, but that will instead be made in fiscal 2016 because Oct. 1, 2016 — the first day of fiscal 2017 — falls on a weekend.

The increase is “largely attributable,” the CBO said, to the budget package Congress passed last month, which retroactively extended a number of tax breaks over the next 10 years.

Over the 2016–2025 period, CBO now projects a cumulative deficit that is $1.5 trillion larger than the $7.0 trillion that it projected in August. It said the tax breaks will reduce revenues by $425 billion and increase outlays by $324 billion during that period, adding $749 billion to projected deficits.

The CBO forecast shows deficits widening every year in dollar terms, due to the ballooning costs of federal health care and Social Security, and higher interest payments. “Larger shortfalls coupled with weak economic expansion make it more challenging for House Republicans to produce a budget resolution that projects a balance over the next decade,” Bloomberg said.