The FY2013 federal budget deficit will be over $200 billion lower than the previous administration estimate, according to the Office of Management and Budget (OMB).
In its annual Mid-Session Review of the budget and the administration’s economic projections, OMB now expects the FY2013 deficit to be $759 billion, $214 billion lower than it projected ($763 billion) when the FY2014 budget was released in April.
Measured as a share of total Gross Domestic Product (GDP), the deficit will decline from 4.7 percent in FY2013 (down from the previous estimate of 6 percent) to under 3 percent by 2017. OMB projects the deficit share of GDP to continue decreasing each year, falling to 2.1 percent by FY2023.
The lower deficit estimate in FY2013 is due to a combination of higher expected revenue ($65 billion) and lower estimated mandatory (-$104 billion) and discretionary (-$43 billion) spending. OMB also estimates net interest payments will be $7 billion lower than previously expected.
While the FY2013 deficit is lower than OMB previously projected, deficits for FY2014-23 are estimated to be $540 billion more than OMB’s April projection. This adjustment is due primarily to lower revenue (-$384 billion), resulting mostly from a lower economic growth forecast, and higher projected outlays (+$156), primarily from mandatory programs (+$93 billion). Discretionary outlays are expected to increase only slightly more than $20 billion between 2014 and 2023 as automatic spending cuts (mandated in the Budget Control Act) continue depress federal spending.
The OMB projections are based on the administration’s economic assumptions and its proposed spending and revenue proposals. The unemployment rate is expected to average 7.5 percent in 2013 and is projected to decline to under 6 percent in 2017 and hover around 5.4 percent from 2018 to 2023. OMB expects the annual change in consumer prices (CPI-U) to be 1.4 percent in 2013 and level off at 2.2 percent for the period 2015 to 2023.