The baseline federal budget deficit for FY2013 is expected to be $642 billion, according to the Congressional Budget Office (CBO). This latest estimate is $200 billion lower than CBO’s February deficit estimate ($845 billion). The actual budget deficit for FY2012 was $1.1 trillion.
If CBO’s projection were achieved, it would be the lowest deficit since FY2008 ($459 billion).
The decline in CBO’s projected FY2013 deficit reflects a 15 percent increase in revenue (+$363 billion), while outlays are expected to decline by $82 billion.
Increased revenue from individual income taxes and social insurance taxes will drive higher revenue in 2013. These receipts will be higher primarily due to the higher tax rates on high personal income levels and the expiration of the two percentage point payroll tax cut.
CBO’s projects total discretionary outlays will decline by $72 billion to $1.213 trillion in FY2013, reflecting the automatic spending reductions required by the Budget Control Act. Mandatory spending is expected to fall slightly (-$11 billion). Interest payments are projected to rise only slightly.
For the period FY2014 to 2013, CBO expects the deficit to be $618 billion lower than they projected in February. The deficit will drop to $378 billion in FY2015 before beginning to increase again due to rising health care costs and growing interest payments on the debt. By FY2023, CBO projects the deficit to rise to $895 billion, unless changes are made to current law. CBO baseline estimates assume a continuation of current law for both expenditures and revenue.