By Erik Wasson - 05/14/13 06:23 PM EDT
The nonpartisan Congressional Budget Office (CBO) on Tuesday said the federal budget deficit this year will shrink to $642 billion — the smallest since before President Obama took office and more than $200 billion less than the agency projected in February.
The deficit in fiscal 2012, which ended Sept. 30, was $1.1 trillion, the fourth time it was above $1 trillion under Obama's administration.
The office said the revenue increases are temporary.
The CBO had assumed in February that Congress would allow $80 billion in funds to be sequestered from this year’s discretionary budget. The cuts went into effect March 1 as scheduled.
Over the next 10 years, the budget office predicts the government will add $6.3 trillion in new deficits. That is $618 billion less than was predicted in February, and the change is primarily due to lower healthcare and Social Security costs.
While the numbers may take some wind out of the sails of budget hawks, the basic trajectory of spending over time remains in place.
In 2023, the deficit will rise to $895 billion as the population ages and entitlement spending continues to rise. This is a slight improvement from the $978 billion figure the budget office projected for 2023 three months ago.
Republicans on the House Budget Committee said that the CBO had "provided a fresh reminder of Washington’s out-of-control spending." They noted in an analysis that higher revenue chases ever higher spending in the report, to the tune of some $6 trillion a year.
The top House Democrat on the Budget Committee said that the CBO report underscored the need to reverse near-term spending cuts to help the economy while working toward a long-term compromise that involves tax increases.
“The good news from today’s CBO report is that the near-term deficit is improving, but much of the improvement is a result of temporary factors. We must avoid austerity measures that would slow job growth in the short term, as we also work to reduce the long-term deficit in a balanced way," Rep. Chris Van Hollen (D-Md.) said.
The Campaign to Fix the Debt, which marshals corporate resources to lobby for deficit reduction, said that "the rosier-than-expected near-term projections do not change the fact that rising health care costs, an aging population, Social Security’s looming insolvency, and ever-increasing interest payments will greatly expand the national debt as a share of the economy starting at the end of the current decade."
"Implementing a deficit-reduction plan now, instead of waiting until the deficit begins to grow again, will allow us to deal with these long-term challenges through smart reforms that are phased in gradually," it said.
— Published at 2:23 p.m. and last updated at 4:33 p.m.