NY Times: Budget Office Cuts Estimate of Nation’
Post# of 1629
Posted On: 05/14/2013 8:42:10 PM
NY Times: Budget Office Cuts Estimate of Nation’s 2013 Deficit by 24%
By ANNIE LOWREY
Published: May 14, 2013
WASHINGTON — The nonpartisan Congressional Budget Office has slashed its projections of the current-year fiscal deficit because of bigger-than-expected tax receipts and payments from Fannie Mae (FNMA) and Freddie Mac.
In a periodic update to its projections, the office on Tuesday estimated that the deficit for the current fiscal year, which ends on Sept. 30, would be about $642 billion, or 4 percent of economic output. Just three months ago, it projected that the current-year deficit would be $845 billion, or about 5.3 percent of economic output.
The $203 billion, or 24 percent, reduction to the estimated deficit does not comes from the $85 billion in mandatory cuts known as sequestration, or the package of tax increases that Congress passed this winter to avoid the so-called fiscal cliff. The office had already incorporated those policy changes into its February forecasts.
Rather, it comes mostly from higher-than-expected tax payments from businesses and individuals, as well as an increase in payments to the taxpayers from the bailed-out mortgage financiers Fannie Mae and Freddie Mac.
The Congressional Budget Office said it had bumped up its estimates of current-year tax receipts from individuals by about $69 billion and from corporations by about $40 billion. The office said the factors bolstering tax payments seemed to be “largely temporary,” in part because of higher-income households realizing investment income before tax rates went up in the 2013 calendar year.
It also cut expected spending on Fannie and Freddie by about $95 billion, a reflection of bigger checks that the two companies are cutting to the taxpayers. The mortgage financiers, which have required more than $180 billion in taxpayer financing since the government rescued them in 2008, have returned to profitability in recent quarters on the back of a stronger housing market.
The budget office is now projecting a 10-year cumulative deficit that is $618 billion smaller than it projected a few months ago. The long-term changes are mostly because of smaller projected outlays for the entitlement programs of Social Security, Medicaid and Medicare, as well as smaller interest payments on the debt.
For instance, in February, the budget office projected that the United States would spend about $8.1 trillion on Medicare and $4.4 trillion on Medicaid over the next 10 fiscal years. It now projects spending of $7.9 trillion on Medicare and $4.3 trillion on Medicaid .
The report again noted that health care cost growth seems to have slowed, leading the budget office to cut its longer-term estimates of health spending by tens of billions of dollars in recent years.
The figures demonstrate just how successful Washington has proved at slashing the deficit through tax increases and spending cuts over the last two years — and how powerful a stronger recovery might be in aiding the federal budget in the long term.
For the first four years of the Obama administration, the deficit totaled more than $1 trillion a year. As of 2009, the budget gap was equivalent to more than 10 percent of economic output. According to the budget office’s new numbers, it will fall to 2 percent — a level that many economists consider sustainable in the long run — in the 2015 fiscal year.
But the office noted that the federal budget gap would probably widen later in the decade, as the country spent more on health care for its aging population as well as more on debt-service payments.
By ANNIE LOWREY
Published: May 14, 2013
WASHINGTON — The nonpartisan Congressional Budget Office has slashed its projections of the current-year fiscal deficit because of bigger-than-expected tax receipts and payments from Fannie Mae (FNMA) and Freddie Mac.
In a periodic update to its projections, the office on Tuesday estimated that the deficit for the current fiscal year, which ends on Sept. 30, would be about $642 billion, or 4 percent of economic output. Just three months ago, it projected that the current-year deficit would be $845 billion, or about 5.3 percent of economic output.
The $203 billion, or 24 percent, reduction to the estimated deficit does not comes from the $85 billion in mandatory cuts known as sequestration, or the package of tax increases that Congress passed this winter to avoid the so-called fiscal cliff. The office had already incorporated those policy changes into its February forecasts.
Rather, it comes mostly from higher-than-expected tax payments from businesses and individuals, as well as an increase in payments to the taxpayers from the bailed-out mortgage financiers Fannie Mae and Freddie Mac.
The Congressional Budget Office said it had bumped up its estimates of current-year tax receipts from individuals by about $69 billion and from corporations by about $40 billion. The office said the factors bolstering tax payments seemed to be “largely temporary,” in part because of higher-income households realizing investment income before tax rates went up in the 2013 calendar year.
It also cut expected spending on Fannie and Freddie by about $95 billion, a reflection of bigger checks that the two companies are cutting to the taxpayers. The mortgage financiers, which have required more than $180 billion in taxpayer financing since the government rescued them in 2008, have returned to profitability in recent quarters on the back of a stronger housing market.
The budget office is now projecting a 10-year cumulative deficit that is $618 billion smaller than it projected a few months ago. The long-term changes are mostly because of smaller projected outlays for the entitlement programs of Social Security, Medicaid and Medicare, as well as smaller interest payments on the debt.
For instance, in February, the budget office projected that the United States would spend about $8.1 trillion on Medicare and $4.4 trillion on Medicaid over the next 10 fiscal years. It now projects spending of $7.9 trillion on Medicare and $4.3 trillion on Medicaid .
The report again noted that health care cost growth seems to have slowed, leading the budget office to cut its longer-term estimates of health spending by tens of billions of dollars in recent years.
The figures demonstrate just how successful Washington has proved at slashing the deficit through tax increases and spending cuts over the last two years — and how powerful a stronger recovery might be in aiding the federal budget in the long term.
For the first four years of the Obama administration, the deficit totaled more than $1 trillion a year. As of 2009, the budget gap was equivalent to more than 10 percent of economic output. According to the budget office’s new numbers, it will fall to 2 percent — a level that many economists consider sustainable in the long run — in the 2015 fiscal year.
But the office noted that the federal budget gap would probably widen later in the decade, as the country spent more on health care for its aging population as well as more on debt-service payments.
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