Federal deficit falling to lowest in Obama presidency

Susan Davis | USA TODAY

WASHINGTON — The federal government's 2015 budget deficit will fall slightly this year to $468 billion, the lowest since President Obama took office, according to the annual budget outlook released Monday by the nonpartisan Congressional Budget Office.

The annual deficit topped $1 trillion for each of Obama's first four years in office, including a record $1.4 trillion in 2009. Deficits have since fallen due to a combination of federal spending cuts and economic growth. The government had a shortfall of $483 billion in 2014.

"In CBO's estimation, increases in consumer spending, business investment and residential investment will drive the economic expansion this year and over the next few years," states the report.

CBO also projects the unemployment rate will fall further -- to 5.3% by 2017 -- as more people are encouraged to enter or stay in the workforce. The budget agency estimates that the number of U.S. residents without health insurance will drop from 42 million last year to 36 million this year, largely because the Affordable Care Act.

Top Democrats hailed the budget outlook as proof that Obama's economic policies have been effective. "Over the last few years as deficits have fallen, so too has the effectiveness of Republican rhetoric about a 'big government' boogeyman," said Sen. Charles Schumer, D-N.Y.

However, the near-term positive economic news is clouded by a longer-term view that projects slower gross domestic product (GDP) growth beyond 2017, relative to similar growth periods in the 1980s and 1990s.

While the deficit is projected to hold steady through 2018, CBO projects the gap between spending and revenues will continue to grow due to the retirement of Baby Boomers and healthcare costs associated with an aging population, as well as rising interest rates on the federal debt.

"Thanks to Republicans' efforts to cut spending this year's deficit is projected to be smaller, but in order to balance the budget we must address the true drivers of our debt," said Cory Fritz, a spokesman for House Speaker John Boehner, a Republican. "Real, robust economic growth won't occur until we solve our government's spending problem."

By 2025, CBO projects a $1.1 trillion annual deficit or 4% of GDP unless Washington takes steps to reduce deficit spending.

"The underlying point is that we have a handful of very large federal programs that provide benefits to older Americans," said CBO Director Doug Elmendorf. "And with the rising number of older Americans and a rising cost of health care, those programs get much more expensive."

Elmendorf is scheduled to testify before the House and Senate Budget committees this week on the report's projections.

Obama will send his annual budget request to Capitol Hill on Feb. 2. House Republicans are expected to offer a budget this spring that will provide for no deficit within a decade.

Contributing: Associated Press