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CBO lowers deficit projection by $20B

The nonpartisan Congressional Budget Office (CBO) on Wednesday lowered its projection for the fiscal 2014 federal deficit to $486 billion.

The estimated shortfall is $20 billion less than the $506 billion deficit the CBO predicted in August. Fiscal 2014 ended on Sept. 30. In April, the office projected the deficit would be $492 billion.

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Relative to the size of the economy, the deficit for 2014 would be 2.8 percent of gross domestic project (GDP). As a percentage of GDP, the deficit has declined every year since it peaked at 9.8 percent of GDP in 2009.
 
The CBO’s deficit projection is based on data collected from the Daily Treasury Statements, but the Treasury Department will report its official deficit tally later this month.

The projected shortfall is the smallest recorded since 2008 and $195 billion less than deficit from fiscal 2013.

The CBO said it lowered its deficit forecast because the government’s revenue was $7 billion more than it anticipated, while spending fell $13 billion short of projections.

Government revenue is expected to total $3.013 trillion for fiscal 2014, the CBO estimates, which is $239 billion more than in 2013.

The largest increases in revenue came from individual income taxes, payroll taxes, corporate income taxes and receipts from the Federal Reserve.

The CBO estimates the government spent $3.499 trillion in fiscal 2014 — 1 percent more than it did in 2013.
 
Spending on healthcare programs for low-income people increased last year, with more spent on Medicaid and subsidies for health insurance purchased through exchanges created by ObamaCare. Spending on Social Security benefits rose by 5 percent and spending on programs under the Education Department rose by 46 percent.

The government spent less in other areas to offset those spending increases. The CBO estimates the U.S. spent 5 percent less on military activities under the Defense Department. Spending on unemployment benefits dropped, as did spending by the Housing and Urban Development Department. The Homeland Security Department spent 26 percent less in fiscal 2014 than in 2013 because of a lesser need for flood insurance and disaster relief.

The CBO estimates the government ran a surplus of $106 billion last month, which is $31 billion more than in September 2013.

The new projections are good news for the Obama administration with less than a month to go before the midterm elections, when Republicans could win the majority in the Senate.  

The CBO report comes after the government’s positive September jobs report released Friday. The unemployment rate fell to 5.9 percent last month, which was the lowest in six years.

— This story was updated at 11:31 a.m.