The Congressional Budget Office is projecting deficits will be smaller than earlier estimated, and the main reason is that disaster spending is on track to be less than previous forecasts.
In its latest budget baseline update, the agency estimates the fiscal 2019 deficit will be $897 billion, down by $75 billion from the $973 billion projected in the CBO’s previous budget outlook.
In a separate report, CBO estimated the five-week partial government shutdown, which ended Jan. 25, will reduce inflation-adjusted gross domestic product in the fourth quarter of 2018 by $3 billion, or 0.1 percent, and in the first quarter of 2019 will be cut by $8 billion, or 0.2 percent, compared to what it would have been without a government closure.
CBO Director Keith Hall outlined the budget and economic outlook Monday morning and will discuss it in appearances on Capitol Hill starting Tuesday.
The new projections delay the return of $1 trillion deficits. In April, CBO projected a $1 trillion deficit in fiscal 2020, which begins Oct. 1. In the updated estimate, trillion-dollar deficits do not reappear until 2022, when the deficit is projected to be $1.13 trillion.
Over the fiscal 2019 to 2028 period, the cumulative deficit is estimated to be $11.2 trillion, about $1.2 trillion smaller than the earlier projected $12.4 trillion.
The CBO said in the report that the “substantial reduction over the 10-year period is almost entirely because appropriations for 2019 that are designated as emergency requirements total $2 billion so far — a sharp reduction from the $108 billion that was appropriated in 2018, mostly for relief and recovery efforts related to the hurricanes and wildfires that occurred in 2017.”
Under the agency’s statutory rules for making estimates, the drop in disaster spending in fiscal 2019 causes the agency to project that future disaster spending will grow at the rate of inflation above the 2019 level of spending over the next decade. In last year’s report, the 10-year estimate of disaster spending was much higher because of the massive amount of disaster relief provided in fiscal 2018, which dramatically increased anticipated baseline costs in the future.