The Congressional Budget Office (CBO) on August 23, 2016, estimated that the FY 2016 deficit will total $590 billion, $152 billion higher than the FY 2015 deficit and $56 billion higher than CBO's previous estimate in March because revenues are now expected to be lower than earlier anticipated.

This will be the first increase in the budget deficit since 2009, and it is projected to push federal debt held by the public to almost 77% of GDP at the end of 2016 — about 3 percentage points higher than last year's amount and the highest ratio since 1950, CBO said. As CBO projected last month, federal debt held by the public is projected to rise to nearly 86% of GDP in 2026.

In "An Update to the Budget and Economic Outlook: 2016 to 2026," CBO said the cumulative deficit through 2026 ($8.57 trillion) is smaller than projected in March ($9.28 trillion), primarily because of lower projected interest rates and therefore lower outlays for interest payments on federal debt. "Nevertheless, by 2026, the deficit is projected to be considerably larger relative to gross domestic product (GDP) than its average over the past 50 years," the report said, adding that the budget deficit is generally on an upward trend over the next decade, reaching 4.6% of GDP in 2026.

The report said outlays would remain around 21% of GDP for the next few years before growing to 23.1% in 2026, mainly attributable to the aging of the population and rising health care costs per person, substantially boosting projected spending for Social Security and Medicare.

Revenues are projected to increase from 17.8% of GDP in 2016 to 18.5% by 2026, compared to an average of 17.4% over the past 50 years. Corporate income tax receipts are projected to change little over the 10-year period, CBO said.

The report is attached.

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ATTACHMENT

CBO Update