The Deficit Is Falling Fast

A blog about business and economics.
May 14 2013 2:34 PM

The CBO's Projected Budget Deficits Just Shrank by Hundreds of Billions of Dollars  

The Congressional Budget Office just did a new series of baseline budget deficit projections (PDF) and they're a lot lower than the old ones. The short-term deficit, in particular, is way lower. We're looking at a $643 billion deficit for 2013 rather than an $845 billion one. That's about half higher-than-expected tax revenues and about half higher-than-expected payouts from Fannie Mae and Freddie Mac. In both cases what we're seeing is that a stronger-than-expected economy leads to a smaller-than-expected deficit.

But they're also revising the 10-year deficit forecast down by $618 billion, primarily because of the slowdown in health care spending.

Now the trick here is that the important budget deficit problem is actually outside the 10-year window. The current projection has the deficit shrinking for the next couple of years and then growing again. That leaves us with a very manageable 2024 deficit. The problem is that it's trending upward. And nothing in this revised projection changes that fact. Under current law, the deficit will bottom out in a few years and then grow and grow forever.

The flipside, though, is that there's really no need to panic or think that there has to be a grand bargain. What we need are more measures to reduce the cost of health care and more measures to boost economic growth.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.