The nonpartisan Congressional Budget Office (CBO) on Wednesday raised its projection for this year’s federal deficit to $506 billion.
The budget office’s last report in April had projected the deficit for fiscal 2014 would top out at $492 billion on Sept. 30.
But the CBO said it is increasing the deficit figure now, in part, because receipts from corporate income taxes are turning out to be $37 billion less than expected.
CBO Director Douglas Elmendorf told repoters it's difficult to assess what is causing the drop in corporate receipts.
“It’s hard to know what to make of that because we don’t have detailed data,” he said. “Companies have put off paying some of the taxes they owe in legal ways. … We think there’s more deferral for payments in the next year than we anticipated.”
Elmendorf added the corporate tax rate has been volatile in recent years, making receipts difficult to forecast. He said the expiration of tax provisions last year has allowed companies to defer their payments.
This year’s deficit projection represents a major drop from the other years of the Obama presidency. Last year’s deficit was $680 billion, compared to the $1.1 trillion deficit the government racked up during Obama's first year in the White House in 2009.
The CBO projects the deficit in 2015 will drop to $469 billion, which would be 2.6 percent of the nation’s gross domestic product (GDP) and down from this year's projection of 2.9 percent of GDP.
The economy is expected to grow slowly for the rest of this year, but then expand at a faster pace over the next two. Gross domestic product has increased by 1.5 percent over the last year, and the CBO projects it will increase to an annual rate of 3.4 percent between 2014 through 2016.
The improving economy will lead to more business investments, consumer spending and home building, the budget office says.
Rep. Chris Van Hollen (D-Md.), ranking member on the House Budget Committee, said the U.S. economy has made progress but needs action from Congress to push it along.
“Unfortunately, Washington Republicans have blocked us at every turn. Instead of boosting working families, they have protected special interests and the very wealthy at the expense of everyone and everything else,” he said.
Republicans, meanwhile, said the CBO report shows the need for new curbs on federal spending.
“Too many families are living paycheck to paycheck, and if this report is any indication, things aren’t getting much better. We need to get spending under control, so we can build a healthy economy and expand opportunity for everyone in this country,” a spokesman for the Republicans on the House Budget Committee told The Hill.
After 2018, the deficit is expected to rise to about 4 percent of GDP through 2024. Deficits over the last 40 years have averaged about 3.1 percent of GDP.
The CBO also projects the federal debt for this year will reach 74 percent of GDP — double its 2007 level and higher than any year since 1950. Debt is estimated to hit 77 percent of GDP in 2024.
Increasing debt will have a negative effect on the overall economy, the CBO says, and would increase the risk of a fiscal crisis.
The agency says higher debt would cause federal spending for interest payments to increase, restrain long-term economic growth and leave lawmakers with less flexibility to address fiscal challenges.
The deficit is expected to reach $960 billion in 2024 due to an aging population, rising healthcare costs and an expansion of federal subsidies for insurance.
Federal spending for major healthcare programs will jump by $67 billion, or 9 percent, this year.
Medicaid will account for the largest increase, which is expected to grow by $40 billion this year as some states expand eligibility under ObamaCare. Spending for Social Security is also projected to rise by $37 billion this year.
The CBO says its earlier projections on ObamaCare spending haven’t changed for this year or over the next 10 years because there is limited information about the effects of the healthcare law.
Over the next decade, it says spending for the government’s major healthcare programs are expected to rise by more than 85 percent.
— This story was last updated at 11:41 a.m.