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July 15 — The White House slightly trimmed both its estimates of near-term budget deficits and economic growth in an update to its February budget plan.
The mid-session budget review, issued July 15 by the White House's Office of Management and Budget, saw the projected deficit for the 2016 budget year marked down to $600 billion from the $616 billion gap forecasted in February . For fiscal 2017, which begins Oct. 1, the forecast was marked down more sharply, to $441 billion from $503 billion.
“The policies in the Budget show that investments in growth and opportunity are also compatible with putting the Nation’s finances on a strong and sustainable path. The MSR demonstrates that, under the Budget’s policies, deficits remain below three percent of GDP while debt is stabilized and put on a declining path for the next decade – key measures of fiscal progress,” the report said.
While the White House has touted lower annual deficits since their nominal record set in 2009, the 2016 deficit will mark the first time the annual shortfall will have grown since 2011. Longer-term, the budget picture also remains cloudy, as the nonpartisan Congressional Budget Office said July 12 spending cuts or tax increases of $330 billion a year would be needed to keep debt stable over the next 30 years (See previous story, 07/13/16).
Unlike the CBO's forecasts, which assume current law remains in place, the OMB's assume the White House's policy proposals in its budget are put in place. The CBO, which projected a 2016 deficit of $534 billion in March, is expected to release its own updated projections sometime in August.
In the OMB report, the administration also marked down some of its economic projections. Gross Domestic Product, measured on a fourth quarter-over-fourth quarter basis, was revised down to a projected 2.2 percent annual growth rate for all of 2016 and a slightly faster 2.4 percent pace in 2017. In February, those estimates were 2.7 percent and 2.5 percent, respectively.
“Since the Budget forecast was finalized, the early part of 2016 saw a number of headwinds that may have contributed to the relatively modest growth in the first quarter. Stock markets were especially volatile early in the year, as many investors contended with concerns about the state of the world economy and slow, or even negative, growth in a number of large emerging economies. Domestic productivity growth also remained below its long-run average rate,” the report said.
Unemployment is also expected to be slightly higher than the administration had projected in February. The annual average is forecasted to be 4.8 percent for all of 2016, up from a previously projected 4.7 percent, while 2017 joblessness is estimated at 4.7 percent, two-tenths of a percentage point higher than seen in February.
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