By Mark Felsenthal
WASHINGTON (Reuters) – The White House lowered its U.S. federal deficit forecast for the 2014 fiscal year by $66 billion to $583 billion on Friday on the basis of gathering economic momentum as evidenced by gains in hiring.
“The deficit has been cut by more than half as a share of the economy, representing the most rapid sustained deficit reduction since World War Two, and it continues to fall,” acting White House budget director Brian Deese said in a statement.
Despite the narrower deficit, Republicans and analysts raised concerns about high levels of debt over the long term. The White House projection shows that, even thought debt is on a declining path, it would reach 72 percent of GDP in 2024 instead of 69 percent as originally estimated, the Committee for a Responsible Federal Budget noted.
The Obama administration projected a $649 billion deficit for the fiscal year ending on Sept. 30 when it delivered its budget proposal to Congress in March. The deficit peaked at $1.4 trillion in 2009 in the aftermath of the recession that ended that year.
The White House said it revised its forecast in the so-called mid-session review because the national unemployment rate has come down more rapidly than expected. The jobless rate fell to 6.1 percent in June from 6.7 percent in March, a six-year low.
The administration said it now expects the deficit to be 3.4 percent of gross domestic product for the year, down from 3.7 percent, and to fall to below 3 percent of GDP in 2015.
President Barack Obama in recent speeches has pointed to an improving economic climate, citing gains in hiring, housing and manufacturing. But wages have lagged and polls show many Americans remain downbeat about their prospects five years into the recovery from the recession.
“It is clear that much more needs to be done to accelerate economic growth,” the White House said on Friday.
Since budget fights that led to the 16-day government shutdown in October 2013, some of the battle lines between congressional Republicans and the White House have softened.
However, Obama and Republican lawmakers are still at odds over spending levels. Lawmakers balked at the president’s request this week for $3.7 billion in emergency funds to bolster border security, saying it is too high.
House of Representatives Appropriations Committee Chairman Harold Rogers said the request might have to be included in normal spending bills for the 2015 fiscal year that starts Oct. 1. If so, the costs would be subject to an overall spending cap of just over $1 trillion, meaning there would have to be cuts elsewhere.
Reacting to the mid-session review numbers, the Republican staff of the Senate Budget Committee said the deficit reduction could be greater if the president’s spending request were held in check.
“The modest reduction in deficits and debt claimed in the budget are accompanied by significant increases in federal spending,” the committee’s Republican staff said.
(The story corrects final two paragraphs to show Republican statement was by Senate Budget Committee Republican staff, not Senate Budget Committee ranking Republican Jeff Sessions.)
(Reporting by Mark Felsenthal; Editing by Doina Chiacu, Will Dunham and James Dalgleish)