Budget deficit set to rise thanks to year-end tax deal

Source: Wash. Post

The federal budget deficit is expected to increase in 2016 for the first time in six years, due mostly to a massive tax package Congress passed last month as part of a year-end budget deal.

The fiscal 2016 deficit is projected to be $544 billion in 2016, according to a report released Tuesday by the Congressional Budget Office, which would be $105 billion more than last year. The deficit will rise for the the first time since 2009 when measured against the size of the economy, which economists says is the best way to measure the government’s fiscal shortfalls, according to the report. The 2016 deficit is projected to increase to 2.9 percent of economic output, or Gross Domestic Product (GDP), from 2.5 percent last year.

The official congressional scorekeeper said the increase is largely attributed to the year-end legislation, which extended a series of tax breaks for both businesses and individuals at a cost of $650 billion over 10 years. In the past, Congress has generally extended these tax provisions for a year or two to minimize their impact on the deficit over the long-term. But this year. leaders in both parties pushed to make some of the tax breaks permanent despite warnings from deficit hawk groups that such a deal would be a budget buster.
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The deficit spiked at the end of the Bush administration and as President Obama took office due to the severe economic recession and the financial crisis. In fiscal 2009 it reached 9.8 percent of GDP. But the government’s fiscal picture has steadily improved since and despite some complaints from Republican candidates about the government’s overall debt levels, the deficit has not been a major focus of the presidential campaign on in Congress.

Read more: https://www.washingtonpost.com/news/powerpost/wp/2016/01/19/federal-budget-deficit-to-rise-in-2016-for-the-first-time-in-six-years/