WASHINGTON — The U.S. budget deficit is set to fall to $514 billion this year, down substantially from last year and the lowest level by far since President Barack Obama took office five years ago, a congressional report said Tuesday.
The Congressional Budget Office credits higher tax revenues from the rebounding economy and sharp curbs on agency spending as the chief reason for the deficit's short-term decline.
But the budget experts see the long-term deficit picture worsening by about $100 billion a year through the end of the decade because of slower growth in the economy than they had previously predicted.
The report also updates the budget office's analysis of the new health care law. It now projects that Obama's signature legislation will lead to about 2 million fewer full-time workers by 2017, a significantly larger effect on employment than predicted previously. The reduction in employment, the agency said, is because many people will choose not to work or will work fewer hours because of the law's incentives, which include subsidized health coverage for people who don't have workplace coverage.
The agency also reduced its estimate of the number of uninsured people who will get coverage through the health care law. The budget experts now say about 2 million fewer people will get covered this year than had been expected, partly because of website problems that prevented people from signing up last fall when new markets for subsidized private insurance went live.
Website woes have largely cleared up, but the nonpartisan analysts said they expect 1 million fewer people to sign up through the new insurance exchanges, for a new total of 6 million in 2014. Enrollment will pick up in 2015, topping 20 million in 2016 and beyond.
CBO also revised its Medicaid projection down by 1 million, for a new total of 8 million in 2014. About half the states have accepted the health law's Medicaid expansion.
Last year's deficit registered $680 billion. Obama inherited an economy in crisis and the first deficits ever to exceed $1 trillion. The 2009 deficit, swelled by the costs of the Wall Street bailout, hit a record $1.4 trillion, while the deficits of 2010 and 2011 both registered $1.3 trillion.
The report predicted the economy will continue to rebound this year and grow at a 3.1 percent rate and by 3.4 percent next year. It foresees the jobless rate holding steady at 6.8 percent this year; the most recent nationwide unemployment rate registered 6.7 percent. It predicts the jobless rate remaining above 6 percent through the remainder of Obama's term.
The agency sees the deficit sliding to $478 billion next year before beginning a steady rise years through 2024 that would bring deficits back above $1 trillion a year.
"CBO expects that economic growth will diminish to a pace that is well below the average seen over the past several decades," the report said, citing an aging population and decrease in the rate of growth in the labor force.
As it has for many years, CBO predicts the stark demographics of the nation's retirement programs, especially the growth of Medicare, would eventually spark a debt crisis. The growth of Medicare has been driven by medical inflation. But the ratio of people paying into the program and those receiving benefits is shrinking as the Baby Boom generation retires.
Economists say that too-high deficits and debt are a drag on the economy and squeezing out investment and, if unchecked, could eventually precipitate a European-style fiscal crisis.
Tuesday's report comes as Obama and Republicans in Congress are taking a respite in the budget wars that have periodically consumed Washington since Republicans took control of the House in 2011. The declining deficit numbers mean there's even less urgency to act now.
A December budget agreement and last month's follow-up spending bill could buy peace through November's mid-term elections. Republicans also appear to be taking a less confrontational approach to legislation needed this month to increase the government's borrowing limit to avoid defaulting on its obligations.
House Speaker John Boehner, R-Ohio, said Tuesday that Republicans have "a lot of opinions about how to deal with the debt limit. No decision's been made."
Asked if any debt limit bill could get 218 Republican votes — a majority in the House — Boehner said, "We'll see."
He added, "The goal here is to increase the debt ceiling. Nobody wants to default on our debt. But while we're doing this, we ought to do something about keeping jobs in the economy, about the drivers of our debt."