The White House on Monday released an updated budget, dialing back its estimate for the 2013 fiscal deficit, but also scaling back estimates for the country’s economic growth rate in 2013 and 2014.
When President Barack Obama first released his 2014 budget in April, the 2013 deficit was projected at $973 billion, but that number has been revised to $759 billion. Improving economic numbers and the tax hike on wealthy individuals created sunnier revenue — and thus, lower deficit — predictions.
The new budget also predicts a quicker fall in unemployment than previously expected. But gross domestic product growth expectations were also scaled back — from 2.3 percent to 2 percent in 2013 and from 3.2 percent to 3.1 next year.
The mid-session review said sequestration cuts and slowing growth in both Europe and China caused the downward tweaks in GDP growth.
“The economy was under additional fiscal pressure during the first half of 2013, leading to a reduction in the forecast for growth,” it reads. “As various headwinds die down, and the proposed budget replaces sequestration, the administration expects more rapid growth.”
The fresh deficit estimate is actually higher than the $642 billion May prediction from the nonpartisan Congressional Budget Office. Should either prediction hold, it will be the first time during the Obama administration the annual deficit will come in under $1 trillion. And either would represent a significant drop in the deficit as a percentage of GDP. In 2009, at its height, the deficit was 10.1 percent of GDP; Obama’s current projection would only be 4.7 percent of GDP.
According to a blog post by Office of Management and Budget Director Sylvia Mathews Burwell, it would represent “the fastest period of deficit reduction since the years immediately following World War II.”
But while the sub-$1 trillion predictions continue through the 10-year life of the budget, Monday’s revision did show higher deficit numbers in coming years than previously reported. The 2014 deficit is projected at $750 billion, $6 billion above the previous estimate.
In 10 years, the updated budget says the deficit will increase by $549 billion, $109 billion above the previous estimate. CBO usually submits its own mid-session budget review in July or August, but has not set a release date for its updated prediction, according to Bloomberg.
Analysts Bloomberg surveyed also see the economy growing at an even slower rate than the dialed back numbers the White House presented Monday — 1.9 percent compared to 2 percent this year and 2.7 percent instead of 3.1 percent for 2014.
Of course, all White House budget predictions assume Congress implements the budget’s suggestions — a Herculean task as many in Congress declared the budget dead on arrival. The Washington Post reports many see the end of this fiscal year as Obama’s last chance to push through the changes to the sequester needed to implement many aspects of the budget.