WASHINGTON (AP) — A new government report released Tuesday blames lower-than-expected tax revenues for a spike in this year's budget deficit to $590 billion. That's an increase of about one-third over last year's tally.
The Congressional Budget Office is also lowering its projections of economic growth over the next several years, in part because of the disappointing results so far in 2016. The agency predicts 2 percent growth in the economy this year. Over 2019-2020, CBO sees gross domestic product growing just 1.7 percent.
"Weaker-than-expected economic growth indicated by data released since January, recent developments in the global economy, and a re-examination of projected productivity growth contributed to that downward revisions," CBO said.
On the deficit, CBO's latest report sees a slight improvement in the picture over the longer term, mostly because the government is expected to pay lower interest rates on its almost $20 trillion pile of debt. As a result, the predicted deficit tally over the coming decade — almost $9 trillion — represents an improvement of about $700 billion. Those lower interest rates, however, are expected in large measure because of slower economic growth.
All told, CBO predicts the deficit rising from $590 billion in the budget year ending Sept. 30 to $1.2 trillion in 2026.
Many economists and analysts, CBO included, warn that that rising debt, especially when measured against the size of the economy, is a serious threat to the long-term economic health of the country. Very low interest rates have made the nation's debt relatively easy to handle — for now.
The deficit figures, while expected, amount to a reversal of a steady trend of large but improving deficits on President Barack Obama's watch.
Obama presided over a record deficit of $1.4 trillion in his first year in office as the economy reeled and the government pumped hundreds of billions of dollars into rescuing large financial institutions. Wall Street has paid the money back, but Obama has devoted little effort to further tackling the deficit after a 2011 budget and debt deal with Republicans and his success in early 2013 in raising taxes on upper-income earners.
Neither presidential candidate has focused much on the deficit so far in the campaign. GOP nominee Donald Trump has called for large tax cuts but hasn't offered much in the way of cutting spending. Democratic nominee Hillary Clinton wants further tax increases on the wealthy but calls for spending the money on agenda items like infrastructure.