WASHINGTON (TheBlaze/AP) -- The federal budget deficit will drop below $1 trillion for the first time in President Barack Obama's tenure in office, a new report said Tuesday.
The Congressional Budget Office analysis said the government will run a $845 billion deficit this year, an improvement (if you can call it that) compared to last year's $1.1 trillion shortfall but still enough red ink to require the government to borrow 24 cents of every dollar it spends.
The agency projected that the economy will grow just 1.4 percent this year if $85 billion in across-the-board spending cuts take effect as scheduled March 1. Unemployment would average 8 percent.
The report predicted the deficit would dip to $430 billion by 2015, the lowest since the government posted a $459 billion deficit is former President George W. Bush's last year in office. That would be about 2.4 percent when measured against the size of the economy.
But as more and more baby boomers retire and claim Medicare and Social Security and as Obama's health care law takes effect, deficits would move higher and again reach near $1 trillion in the latter portion of the 10-year window.
"The CBO's report is yet another warning that we need to get spending under control. The deficit is still unsustainable," said House Budget Committee Chairman Paul Ryan, R-Wis. "By 2023, our national debt will hit $26 trillion. We can't let that happen. We need to budget responsibly, so we can keep our commitments and expand opportunity."
Ryan promises his upcoming budget plan will balance by 2023, but that would require spending cuts of almost $1 trillion in that year alone.
The economy will grow slowly in 2013 and more rapidly next year, with unemployment projected to stay above 7.5 percent through next year, according to CBO. That would be the sixth straight year above that level, the longest period of such high unemployment in 70 years, the report said.
The CBO report blames “fiscal tightening,” which includes the expiration of Obama's two-year, 2 percentage point cut in payroll taxes and the imposition of the automatic spending cuts, for the lack of economic growth, explaining that it would be about 1.5 percentage points higher this year.
However, CBO warns that future growth would be constrained if the government doesn't reduce future deficits. The report warns that actual deficits could easily be higher since CBO is required to assume Congress sticks to the letter of the law.
But here’s where the report becomes really interesting.
The report says that health spending will continue to grow as Obama's health care law takes full effect. CBO said spending on major health care programs will surpass Social Security in 2014, as Obama's push to cover the uninsured goes into high gear.
CBO also estimates that fewer uninsured people will get coverage under the health care overhaul -- about 4 million fewer Americans. And about 7 million fewer will be covered by job-based health plans.
Tuesday's estimate says the health care law will reduce the number of uninsured by about 27 million people in 2022, as compared to last year's estimate of around 30 million fewer uninsured.
CBO also said it expects more employers to get out of the business of providing health insurance, particularly for low-wage workers, and instead pay fines to the government. Although employer-provided coverage will remain the mainstay for most employees, in 2022 there will be 7 million fewer covered by job based plans, the agency said.
So there’s that.
But, you know, the CBO could be wrong. The report could be wrong about “Obamacare.” The report could be wrong about economic growth. Heck, it could be wrong about unemployment. It wouldn’t be the first time that the CBO has been wrong.
For your consideration, here's a chart from Zero Hedge that illustrates just how mistaken the CBO has been in its deficit forecasts over the past four years.
“The black line is the most disturbing one, if not so much for Obama whose second and (for now) final term ends in 2016, then certainly for the unlucky sod who gets to follow in his footsteps,” writers at the Hedge note.
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