CBO: Federal deficit to rise to $544 billion

CBO: Federal deficit to rise to $544 billion
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The federal budget deficit is expected to increase this year for the first time since 2009, according to estimates released Tuesday.

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This year’s budget shortfall is expected to rise to $544 billion, about $105 billion more than last year, according to a decade-long economic outlook released by the nonpartisan Congressional Budget Office (CBO).

The size of the deficit amounts to about 2.9 percent of the country’s gross domestic product (GDP), the highest level since it peaked at 9.8 percent during the depths of the recession in 2009.

The outlook through 2016, while more grim than those of the last five years, also projects that the overall economy will "expand solidly." 

The new estimates mark an abrupt shift from CBO estimates released in August, when the agency lowered its projections for the deficit by about a half-trillion dollars. That figure was a seven-year low for the government’s annual budget shortfalls.

Since then, President Obama and GOP leaders negotiated a massive $680 billion spending and tax package that included retroactive tax breaks for companies and individuals.

Accounting for that legislation, the newest CBO estimates reflect a deficit $130 billion larger than its projections in August.

Another driver of the deficit is steady growth of mandatory spending programs like Social Security and Medicaid. The costs of those programs will rise $168 billion compared to last year’s spending.

Spending on federal health programs alone — including Medicare, Medicaid and subsidies from the Affordable Care Act — will increase 11 percent compared to 2015 levels.

Discretionary spending is also expected to grow in 2016, with $32 billion more budgeted this year than the previous year. That increase largely stems from the 2015 budget deal struck by congressional leaders in November.

The congressional budget scorekeeper also offered a dimmer forecast for economic growth over this year: It's now estimated at 2.7 percent growth, down from its 3 percent projection last August.

Within 10 years, the deficit will grow to $9.4 trillion – more than a trillion over what had been projected in August, before Congress passed its massive package of tax breaks.

This report was updated at 11:09 a.m.