The US Congressional Budget Office raised its forecast for the US fiscal deficit this year on Wednesday, but said it would still be much lower than last year’s.
The CBO also reiterated its medium-term view that the US deficit will begin accelerating at the end of this decade, gaining size in real terms and as a percentage of gross domestic product.
The agency’s new estimate for the deficit for the year ending September 30 is $506 billion, out of a $3.5 trillion budget, slightly higher than the $492 billion in its April estimate.
The CBO said lower-than-expected tax payments by businesses forced it to cut its forecast for total government receipts.
Even so, the total deficit would be $174 billion less than last year’s, and come in at 2.9 percent of GDP, down from almost 10 percent in fiscal 2009, when the crisis-period deficit hit $1.4 trillion.
That trend was projected to continue over the next three years as the impact of the 2008-2009 Great Recession ebbs, with businesses boosting investment and consumers spending more.
Even so, the persistent deficit will continue to push US debt to higher levels, the CBO forecasted.
Total debt held by the public would rise from 72.0 percent of GDP last year to 74.4 percent this year, and continue to push to more than 77 percent in 2024, when the annual deficit would again approach $1 trillion, on a $4.9 trillion budget.
That rise would come with the rapid increase in Social Security and government medical insurance payments required by an aging population.
The surge in debt needed to finance the deficit over the longer term “would have serious negative consequences,” the CBO said, including higher costs for debt service, slower economic growth, and, eventually, an increase in the risk of another fiscal crisis.