CBO: Deficit hits $435B, budget talks continue as deadline nears

WASHINGTON — Congressional Budget Office said Wednesday that the federal government ran a deficit of $435 billion in the most recent budget year, the smallest deficit since 2007 and below the record shortfalls of President Barack Obama’s first term.

The CBO report said it’s the sixth consecutive drop for the deficit, when measured against the size of the economy, since the $1.4 trillion deficit of Obama’s first term. The improved figures come as Washington is grappling with the need to increase the government’s borrowing cap in November. The White House and lawmakers also are seeking an agreement on a budget to keep the government open past Dec. 11. In Obama’s first term, the deficit was greater than $1 trillion for four years in a row after the Wall Street bailout, a huge stock market drop and a major recession.

The CBO does nonpartisan analysis for Congress. The official estimate from the White House budget office and Treasury Department typically is released in mid-October.

The stronger figures represent 8 percent growth in tax revenue. Spending grew more slowly, though the cost of health exchange subsidies almost doubled to $27 billion.

CBO said it expects the deficit’s downward trend to continue for a couple of years but says in the long term, baby boomers’ retirement and its effect on programs such as Medicare and Social Security will likely cause a fiscal crisis.

Two attempts by Obama and House Speaker John Boehner, R-Ohio, to negotiate a deficit-cutting package ended after Boehner pulled out of talks. Now, Obama is refusing to offer concessions in exchange for raising the $18.1 trillion borrowing cap. Treasury Secretary Jacob Lew has warned Congress to act by Nov. 5 to avoid a default, though an analysis by the Bipartisan Policy Center think tank in Washington says the absolute latest deadline will fall between Nov. 10-19.