US an­a­lysts lower ’15 deficit forecast to US$426 bil.

The China Post - - WORLD BUSINESS -

The U.S. leg­is­la­ture’s of­fi­cial bud­get an­a­lyst pro­jected Tues­day that this year’s U.S. gov­ern­ment deficit will drop to US$426 bil­lion, the low­est short­fall of Barack Obama’s pres­i­dency, in a re­port pro­vid­ing po­lit­i­cal am­mu­ni­tion to both the rul­ing cen­ter-left Demo­cratic Party and the op­po­si­tion right-wing Repub­li­can Party.

But the an­nual sum­mer­time up­date by the non­par­ti­san Con­gres­sional Bud­get Of­fice also con­tained words of warn­ing. It cau­tioned that with­out ac­tion by law­mak­ers, a gray­ing pop­u­la­tion and grow­ing health care costs will push an­nual fed­eral deficits up­ward again later this decade, spik­ing back above US$1 tril­lion in 2025. That would push the gov­ern­ment’s to­tal debt, ac­cu­mu­lated over decades, to US$21 tril­lion by 2025, or 77 per­cent of the U.S.’ pro­jected eco­nomic out­put that year. Econ­o­mists say such amounts could drive up in­ter­est rates, boost gov­ern­ment debt costs and hin­der law­mak­ers from us­ing tax and spend­ing changes to ease the im­pact of fu­ture re­ces­sions. “The growth in debt is not sus­tain­able,” bud­get of­fice chief Keith Hall told re­porters. “You can’t pre­dict tip­ping points, but at some point this be­comes a prob­lem.”

The bud­get of­fice re­leased its fig­ures two weeks be­fore law­mak­ers re­turn from a sum­mer break steer­ing to­ward a bud­get clash. The Repub­li­can-led Congress has ap­proved a blue­print that uses spend­ing curbs on Medi­care, Med­i­caid and other pro­grams to claim a bal­anced bud­get in a decade, a plan Democrats have de­rided as harsh and un­re­al­is­tic.

“I would cau­tion those who would use this re­port as an op­por­tu­nity to take these short-term sav­ings and push for more spend­ing,” said Se­nate Bud­get Com­mit­tee Chair­man Mike Enzi, a Repub­li­can. He said “real, sub­stan­tive bud­get re­forms and sav­ings will have to be on the ta­ble dur­ing any spend­ing ne­go­ti­a­tions.”

If Re­al­ized, Small­est since 2007

Rep­re­sen­ta­tive Chris Van Hollen, top Demo­crat on the House Bud­get Com­mit­tee, said the re­port shows that Congress has made “im­por­tant progress on re­build­ing our econ­omy and re­duc­ing our deficit.” He said Congress should make “nec­es­sary in­vest­ments” in ed­u­ca­tion and other pro­grams and said se­ri­ous ne­go­ti­a­tions will be needed to avoid a gov­ern­ment shut­down this fall.

Se­nate Ma­jor­ity Leader Mitch McCon­nell, a Repub­li­can, has re­peat­edly said par­ti­san spend­ing clashes will not lead to a gov­ern­ment clo­sure. But it could be hard for the Repub­li­can lead­ers to win con­ser­va­tive votes for spend­ing bills un­less they cut­ting fed­eral pay­ments to Planned Par­ent­hood. Se­cretly filmed videos have shown the or­ga­ni­za­tion’s of­fi­cials dis­cussing how they pro­vide fe­tal tis­sue to med­i­cal re­searchers.

In March, the bud­get of­fice pro­jected a US$486 bil­lion deficit for this fis­cal year, which runs through Sept. 30. The anal­y­sis said the US$60 bil­lion re­duc­tion was largely be­cause col­lec­tions of in­di­vid­ual and cor­po­rate taxes have been higher than ex­pected.

An­nual deficits peaked at a his­toric high of US$1.4 tril­lion in 2009 as the Great Re­ces­sion re­duced U.S. tax rev­enue and drove up gov­ern­ment costs for help­ing low-in­come and job­less peo­ple. Deficits have dropped since then, fall­ing to US$485 bil­lion last year. This year’s US$426 bil­lion pro­jected deficit, if re­al­ized, would be the gov­ern­ment’s small­est since it was US$161 bil­lion in the red in 2007. It would also mean that this year’s short­fall would be 2.4 per­cent the size of the over­all econ­omy, a pro­por­tion that many econ­o­mists con­sider ac­cept­able. On av­er­age over the last 50 years, an­nual deficits have been 2.7 per­cent of the econ­omy’s size. The record 2009 deficit was 9.8 per­cent the size of the econ­omy.

The bud­get of­fice re­port low­ered its pro­jec­tion for 2015 eco­nomic growth to a mod­est 2.3 per­cent, down from its 2.8 per­cent forecast in Jan­uary and re­flect­ing a weak first quar­ter per­for­mance by the econ­omy. But it said the econ­omy “is now on firmer ground,” and pro­jected that growth will re­turn to around 3 per­cent an­nu­ally in 2016 and 2017 be­fore dip­ping again.

Newspapers in English

Newspapers from Taiwan

© PressReader. All rights reserved.