Yesterday, February 5, the Congressional Budget Office (CBO) released its Budget and Economic Outlook report for fiscal years 2013 to 2023. Under the baseline scenario (assuming current federal laws that govern taxes and spending do not change), CBO estimates that the federal budget deficit in fiscal 2013 will shrink to $845 billion or 5.3 percent as a share of gross domestic product (GDP), its lowest level since 2008. The agency’s baseline projections show deficits continuing to fall over the next few years, before starting to increase later in the decade ahead due to the spending pressures of an aging population, the rising cost of health care, expanding federal health insurance subsidies, and greater interest payments on federal debt. By 2023, under current law, CBO estimates that federal debt as a share of GDP will be 77 percent and continue to rise in future years. CBO also discusses how policy decisions surrounding three looming budgetary deadlines – sequestration on March 1, the continuing resolution expiring on March 27, and the federal borrowing limit taking effect again in mid-May – could affect the budget outlook. Regarding the U.S. economy, CBO anticipates economic growth will continue to be slow in calendar year 2013, with real GDP growing 1.4 percent. The rate of inflation and interest rates are expected to remain low. However, CBO also expects that after fiscal tightening in 2013, underlying economic factors (such as an upswing in housing construction and increasing credit availability) will spur faster growth in years to follow, projecting 3.4 percent growth in 2014 and an average of 3.6 percent annual growth from 2015-2018.

Link: CBO Report