The U.S. government's budget deficit is expected to fall by nearly one-third this year, with much of the decline attributed, in part, to lower health care subsidies following the implementation of the Affordable Care Act.
The Congressional Budget Office [CBO] said in a report
Monday that the budget deficit will be $492 billion in 2014, or 2.8 percent of GDP (Gross Domestic Product), compared to 2013, when the deficit stood at about $680 billion or 4.1 percent of GDP.
The CBO credited part of the decline to the health care law
, including coverage provisions, curbs to Medicare and penalties to individuals and businesses that forego insurance.
The CBO said this would be the fifth consecutive year for a decline in the deficit.
It said, however, that after 2015, budget shortfalls will rise because of an aging population, increasing health care costs and increased interest on federal debts.
Overall, the budget referee agency now projects cumulative 10-year deficits at $7.62 trillion compared to its previous forecast of $7.9 trillion.
In addition to the lower health insurance subsidy costs, CBO also estimated a $98 billion 10-year reduction in Medicare outlays due to lower spending on prescription drugs and hospital insurance. Medicaid, the health care program for the poor, would see a $29 billion reduction, CBO said.
CBO lowered its 10-year cost estimate for the federal food stamps program by $24 billion, based on new data from the Department of Agriculture on monthly average benefits.
But the CBO left intact its previous economic projections, which envision rising deficits after 2015 as more of the massive “baby boom” generation retires or drops out of the workforce.
Deficits will reach a low point of $469 billion, or 2.6 percent of U.S. economic output, in 2015, then gradually start to rise, topping $1 trillion again in 2023 and 2024.
U.S. deficits exceeded that dollar amount during each of the first four years of Obama's administration as the economy recovered slowly from the worst recession since the 1930s, falling to $680 billion in fiscal 2013.
Information for this report was contributed by Reuters.