The Congressional Budget Office on Wednesday said federal budget deficit will smaller than previous estimate over the next decade, as the low interest rates trim government’s cost of borrowing.
The agency also revised higher its estimate of fiscal 2014 deficit by $14 billion to $506 billion, 2.9% of gross domestic product. The previous estimate was released in April.
The new revision of higher deficit is largely the result of lower than expected corporate tax revenues of $315 billion from the previous estimate of $351 billion.
Government spending, however, is expected to decline only 0.3% from the April forecast and the CBO also lowered its GDP growth estimate to 1.5% from 3.1% on “economic weakness in the first half of the year.”
Fiscal 2013 federal government deficit of $680 billion was the first budget gap below $1 trillion of Barack Obama’s presidency. The deficit has been declining since 2009 after reaching a record high of $1.4 trillion in 2009.
The shortfall of $506 billion in fiscal 2014 would be the smallest since 2008 when the budget gap was $458 billion.
However, the agency cautioned that the deficit pressures are rising an in the next decade the budget gap is likely to rise against to $1 trillion in 2024 if current federal laws for spending and taxes remain unchanged.