WASHINGTON - The U.S. budget deficit will narrow less than forecast this year even as it falls to the lowest level since 2007 as a share of the economy, according to the Congressional Budget Office.
The projected shortfall will be $506 billion in the 12 months ending Sept. 30, compared with an April prediction for $492 billion and a $680 billion gap posted last year, the nonpartisan CBO said Wednesday in a report. In 2015 it’s projected to shrink for a sixth consecutive year to $469 billion, capping the longest stretch of fiscal improvement since 2000, near the end of an era of surpluses.
A declining jobless rate that’s lifting individual and corporate tax revenue will help narrow the gap next year to about one-third of the record $1.4 trillion deficit reached in 2009, according to CBO data. The report today shows a fiscal picture that’s improving in the near term before starting to deteriorate, with deficits swelling again starting in 2018.
“The federal budget deficit has fallen sharply during the past few years and is on a path to decline further this year and next,” CBO Director Douglas Elmendorf said at a press conference in Washington. “But later in the coming decade, under current law, the gap between spending and revenues would grow again relative to the size of economy, and federal debt would climb.”
The deficit will be 2.9 percent of gross domestic product this year and 2.6 percent next year, the CBO said. In 2007, it was 1.1 percent of GDP.
U.S. Treasuries advanced as the collapse of yields in Europe prompted investors to reach for higher-yielding U.S. debt. The Treasury 10-year yield dropped three basis points, or 0.03 percentage point, to 2.37 percent at 12:11 p.m. New York time, according to Bloomberg Bond Trader data.