CBO raises federal deficit estimate to $506 billion

CBO raises federal deficit estimate to $506 billion

Wed Aug 27, 2014 3:37PM GMT

The nonpartisan Congressional Budget Office (CBO) has raised its estimate for this year’s federal deficit to $506 billion, while slashing its growth forecast for the US economy.

The new estimate is $14 billion more than the budget office’s last report in April which had projected the deficit for fiscal 2014 to hit $492 billion on September 30. The US government’s fiscal year runs from October through September.

The new projection is largely a result of lower-than-expected revenues for the year, in part because receipts from corporate income taxes are $37 billion less than expected.

Corporate tax revenues will be $315 billion in 2014, compared to a prior estimate of $351 billion, CBO said Wednesday.

Meanwhile, the agency slashed its projection of gross domestic product (GDP) growth for the year to 1.5 percent from 3.1 percent, “reflecting the surprising economic weakness in the first half of the year.”

“Later in the coming decade, if current laws governing federal taxes and spending generally remain unchanged, revenues would grow only slightly faster than the economy and spending would increase more rapidly,” CBO said.

The deficit in 2015 will drop to $469 billion, which would be 2.6 percent of the GDP.

After 2018, however, the federal deficit is expected to rise to about 4 percent of GDP through 2024.

The budget office further said public debt would hit 77 percent of GDP in 2024, down slightly from a previous estimate of 78 percent.

The deficit is expected to reach $960 billion in 2024 due to an aging population, rising healthcare costs and an expansion of federal subsidies for insurance.

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