White House says deficit is shrinking
WASHINGTON (AP) — The White House said Monday that the federal budget deficit for the current fiscal year will shrink to $759 billion. That’s more than $200 billion less than the administration predicted just three months ago.
The new figures reflect additional revenues generated by the improving economy and take into account automatic, across-the-board spending cuts that the White House had hoped to avert.
The 2013 budget year ending Sept. 30 will be the first one of Obama’s presidency in which the deficit won’t exceed $1 trillion. Obama inherited a struggling economy and record deficits. A 2011 deficit-cutting deal with Republicans has pared deficits somewhat, as did a tax hike enacted earlier this year on upper-bracket earners.
But Obama has remained at odds with Republicans over cutting benefit programs and further tax increases. The improving deficit picture seems to have taken away some of the momentum for an additional deficit-cutting bargain, but the issue may be rejoined this fall when Obama and Congress need to enact an increase in the nation’s borrowing $16.7 trillion borrowing limit to avoid an economy-rattling default on the government’s obligations.
Last year’s deficit registered about $1.1 trillion. The White House earlier this year predicted the 2013 deficit would be $973 billion.
White House budget director Sylvia Mathews Burwell said that this year’s deficit is less than half of the record deficit posted four years ago when measured against the size of the economy. The 2013 deficit would equal 4.7 percent of gross domestic product versus the 10.1 percent of GDP in 2009.
The White House projected that economic growth would be slightly slower in the coming years than it forecast in April. The report said the automatic spending cuts that kicked in in March will slow down economic growth this year from the 2.6 percent increase it forecast for the fourth quarter of this year to a 2.4 percent increase.
But the White House sees a slightly rosier jobs picture. It projects that unemployment will average 7 percent next year and reach 6.8 percent in the final quarter of 2014. That’s an improvement over the 7.2 percent unemployment it forecast in April as an average for 2014.
White House budget writers said the decline in the unemployment rate — which has remained at 7.6 percent for two months — has been faster than expected when they completed their initial forecast this year.
“Unemployment is now projected to decline somewhat more rapidly than in the budget projections,” the report said.
The government this month said it had received $66.3 billion in dividend payments from the government-affiliated mortgage lenders Fannie Mae and Freddie Mac. The government rescued Fannie and Freddie during the 2008 financial crisis after both incurred massive losses on risky mortgages. The companies received two of the largest bailouts of the crisis.
The recent payments reflect a housing recovery that has made the two lending giants profitable again. So far, Fannie has repaid $95 billion of the roughly $116 billion it received, while Freddie has repaid roughly $37 billion of its $71.3 billion.