White House trims 2013 deficit forecast

The White House released its revised economic forecast projecting a lower 2013 budget, ahead of talks with Congress on increasing the debt ceiling and passing a spending plan for fiscal year 2014.

The 2013 deficit is now expected to hit $759 billion for fiscal year, down from earlier projections of $973 billion, according to the Mid-Session Review released by the Office of Management and Budget on July 8. OMB is predicting a decline in deficits through 2018, at which point they start to climb again as a result of increases in mandatory spending on social safety net programs. However, OMB is projecting a steady drop in deficits as a percentage of the gross domestic product, dropping from 4.7 percent of GDP in 2013 to 2.1 percent of GDP in 2023.

As the Sept. 30 expiration of the continuing resolution approaches, the administration is looking to put and end to the automatic budget cuts under the sequester. According to the report, sequestration has slowed growth in recent months. The report predicts a significant uptick in economic activity and further drops in the unemployment rate after the adoption of a budget. The administration cut its forecast for GDP growth from 2.3 percent for 2013 to 2 percent, blaming "headwinds" including sequestration and slower growth abroad.

All the numbers for 2014 and beyond in the Mid-Session Review are based on the passage of the president's 2014 budget request -- an unlikely prospect. Obama's budget achieves deficit reduction with a mix of new tax revenue and budget cuts. House Republicans are looking to stick with the reduced top-line spending levels achieved under the sequester, and continue to cut taxes.

In a blog post accompanying the release of the document, OMB director Sylvia Mathews Burwell said, "The Budget includes more than enough deficit reduction to replace the economically damaging sequester while exceeding the goal of $4 trillion in deficit reduction and putting our debt on a downward path as a share of the economy. And unlike sequestration, which includes zero long-term deficit reduction, the president’s plan includes structural reforms that will generate growing savings in the second decade and beyond."

Republicans do not seem to be buying it. Alabama Sen. Jeff Sessions, the ranking Republican on the Budget Committee, said, "Today's updated budget report from the White House confirms that the president's budget plan leaves us on an unsustainable fiscal path."

The Congressional Budget Office is expected to release its own set of revised economic statistics in the coming weeks.