September 18, 2014

Mid-Session Review Updates Budget Projections

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The administration has updated its economic and budget projections, indicating that this fiscal year’s deficit will be $1.2 trillion, down $116 billion from the administration’s estimate last February. But this drop is based partly on the assumption that some proposed spending for the current year will not be approved by Congress until next year -- increasing the projected Fiscal 2013 deficit by a small amount.

The Office of Management and Budget (OMB) released the new projections Friday in its Mid-Session Review. This review updates the numbers behind President Obama’s budget and is based, as is traditional, on the unlikely assumption that Congress will approve the President’s proposals.

The administration still projects that its policies would reduce annual federal deficits to below 3 percent of the Gross Domestic Product by 2017 and would keep them there for the rest of the decade.

The report estimates that cumulative deficits from 2013 to 2022 will be $240 billion less than the administration forecast in February. “This reduction,” OMB said, “results primarily from lower projected spending for Medicare, Medicaid, Social Security, and net interest, partially offset by lower projected receipts.”

The administration said it made “only minor modifications” to the economic forecast that was included in the 2013 budget that the President proposed early this year. However, the administration’s projections optimistically estimate that real GDP will grow at a rate of 2.3 percent in 2012 and 2.7 percent in 2013.

By 2015 the administration shows growth exceeding 4 percent -- also an outlook that is optimistic compared to private-sector forecasts and seemingly contrary to recent news. On Friday the Commerce Department said the economy grew in the second quarter of this year at an annual rate of only 1.5 percent, down from 2 percent in the first quarter.