President Obama is poised to notch the lowest deficit of his six-year tenure at just more than a half-trillion dollars, reflecting slow but steady progress he and Congress have made on cutting annual spending.
But the Congressional Budget Office said in a new report Wednesday that the long-term problems remain with entitlements such as Social Security and the major health care programs, which will send deficits soaring back toward $1 trillion within a decade.
The CBO also predicted economic growth will be just 1.5 percent this year, which is worse than the 2.2 percent from a year earlier and 2.3 percent from 2012. Analysts, though, once again predicted a rebound is just around the corner, with growth approaching 3.5 percent the next two years.
“We think there was a stronger case for the pickup in economic growth,” CBO Director Douglas Elmendorf said. “But, of course, notwithstanding that stronger case, we could turn out to be wrong for a variety of reasons.”
Mr. Elmendorf said the economy looks substantially different now than it did in the 1980s and 1990s, with retiring baby boomers, a halt in the rate of growth of women in the workforce and federal tax and spending policies all serving to tamp the economy down.
The fiscal 2014 deficit will be $506 billion, the CBO said, raising its previous estimate from April by $14 billion. Still, that’s the lowest deficit since 2008, and way down from the $1.4 trillion deficit notched in 2009, which covered the last four months of President George W. Bush’s tenure and the first eight months of Mr. Obama’s time in office.
Deficits will remain at about this level for several years before trending back up in 2019, headed back toward the $1 trillion mark, the CBO said.
Those deficits will leave the federal government ever deeper in debt, with debt held by the public reaching 77 percent of gross domestic product in 2024. Just seven years ago, in 2007, that debt figure was but 35 percent of GDP.
Republicans and Democrats traded blame for the news.
“This CBO report says that our economy will actually grow less this year than it did in 2013,” said House Speaker John A. Boehner, Ohio Republican. “Americans deserve better, and the House will continue to focus on solutions that help get people back to work, lower costs at home and restore opportunity for all.”
But Rep. Chris Van Hollen of Maryland, ranking Democrat on the House Committee on the Budget, said the problem lies with Republicans who have blocked Mr. Obama’s efforts to raise the minimum wage and his proposals to punish companies that create jobs overseas or company executives who make more than $1 million.
“Unfortunately, Washington Republicans have blocked us at every turn,” the Maryland Democrat said. “Instead of boosting working families, they have protected special interests and the very wealthy at the expense of everyone and everything else.”
The sparring continues what has been an ongoing fight since the GOP took control of the House in 2011.
The GOP had the early upper hand, winning cuts to annual appropriations that have pushed the government to actually spend less for two straight years — an accomplishment not seen in six decades.
Then the two sides reached a split decision on the so-called “fiscal cliff” deal at the end of 2012, with Mr. Obama winning a raise in the income tax rate paid by the wealthiest, but the GOP winning a permanent extension of lower tax rates for 99 percent of Americans.
More recently, however, Mr. Obama trumped Mr. Boehner, forcing Republicans to back down on their threat to withhold any new borrowing powers unless they were coupled with more spending cuts. Congress ended up approving a debt holiday that gives the administration the power to borrow as much as is needed to keep the government open until March.
Mr. Elmendorf said the tax increases and spending cuts combined to dent the economy over the last year, calling it a “substantial headwind.”
“But we think that effect has now mostly dissipated,” he said.