CBO projects larger federal deficit in 2016

CBO projects larger federal deficit in 2016
© Cameron Lancaster

The federal government will run up a larger-than-expected deficit in 2016 after anemic economic growth in the first half of the year, the Congressional Budget Office (CBO) said Tuesday.

The CBO is projecting that the weaker economy will help drive up the federal deficit to $590 billion by the end of this year — about $56 billion more than it predicted in January. Part of that increase is the result of lower corporate profits, the agency said.   

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This year was expected to be the first time the deficit rose since 2009 — and it is expected to keep rising over the next decade.

The report from the nonpartisan budget scorekeeper offers a dim picture of the first half of 2016, with gross domestic product growing at just 1 percent.

But the CBO also predicts the U.S. economy is approaching an upswing, with more jobs and higher wages over the next two years, driving the rate of GDP growth up to 2.4 percent next year.

The broader forecast for the federal deficit remains grim, however.

Even as the economy rebounds slightly, the budget office is predicting higher federal deficits and a growing national debt.

By the end of this year, the national debt is expected to reach its highest debt-to-GDP ratio since 1950.

By 2026, the national debt is expected to reach $23 trillion, equaling 86 percent of GDP.