Budget deficit shrinks for fourth straight year, but debt compounds

Gregory Korte | USA TODAY

WASHINGTON — The Obama administration closed the books on the 2015 budget Thursday, touting continued progress on shrinking the budget deficit as the federal government spent 5% more but collected 8% more in taxes over the previous year.

The budget deficit shrunk for the fourth straight year in fiscal year 2015, which closed Sept. 30, falling to $439 billion — $44 billion less than 2014. As a share of the economy, the deficit is 2.5%, smaller than at any time since 2007, the Treasury Department said.

But those annual budget deficits continue to compound, with the total national debt now $18.1 trillion, $7.5 trillion more than when Obama took office. And that number has been held down artificially by the "extraordinary measures" the Treasury has taken to stay under the congressionally mandated debt limit. If Congress increases the debt limit — as the Obama administration says it must do by Nov. 3 to avoid default and a resulting economic catastrophe — it will jump even higher.

The Obama administration said continued progress on the deficit was an argument to return to pre-2012 spending levels. “We need to stay focused on strengthening our economy, which means passing a long-term budget that fully funds the government and reverses the harmful cuts known as sequestration to allow for critical investments in both our economic and national security," said White House budget director Shaun Donovan.

Deficit hawks said the results are encouraging, but shouldn't be used as an excuse to order up more spending or tax cuts. The Congressional Budget Office warns that "the long-term outlook for the federal budget has worsened dramatically over the past several years" because of the recession, an aging population and increasing health care costs. In 25 years, the CBO says, the debt will be larger than the gross domestic product — and higher even than after World War II.

“This may well be the lowest it will be for a long time," said Maya MacGuineas of the Campaign to Fix the Debt. "We should reform our unsustainable fiscal trajectory when times are relatively good — the task will only get harder with time.”