WASHINGTON — The federal deficit continues to decline thanks to budget cuts, slower growth in Medicare costs and increased tax revenue, but the nation’s long-term fiscal outlook remains troubled, according to a report Wednesday from the Congressional Budget Office.
At $506 billion for fiscal 2014, the federal deficit is much smaller than those of recent years and is now 2.9 percent of gross domestic product — down from a high of 10 percent of GDP in 2009 during the Great Recession.
Though economic growth has lagged at an average annualized rate of less than 1 percent for the first half of the calendar year, the CBO said it expects stronger economic activity in the second half will push growth to 1.5 percent for the year. The unemployment rate is expected to continue to decline, it said.
Despite improvements in the economic outlook after years of fiscal battles between Congress and the White House, the nonpartisan budget office warned that long-term projections remain dim.