WASHINGTON — A government report released Tuesday estimates that this year's budget deficit will rise to $544 billion, an increase over prior estimates that can be attributed largely to tax cuts and spending increases passed by Congress last month.
The estimate from the Congressional Budget Office also sees the economy growing at a slower pace this year than it predicted just a few months ago. It projects the economic growth will slow to 2.7 percent this year; it foresaw 3.0 percent growth in 2016 in last summer's prediction.
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Over the coming decade, CBO predicts deficits totaling $9.4 trillion. That's up $1.5 trillion from its August estimate, with much of the increase mostly due to last month's tax legislation, which permanently extended several tax cuts that Congress had typically renewed temporarily.
Last year's deficit registered $439 billion, the lowest of President Barack Obama's term in office.
The deficit increase to $544 billion is due to several factors, CBO said, particularly the retroactive extension of tax cuts that had expired at the beginning of last year and additional spending for the Pentagon and domestic agencies that's a result of last year's budget deal. A timing shift are large payments is also at work. The current budget year ends Sept. 30.
The deficit issue has largely fallen in prominence in Washington in recent years, due in large part to its fall from record highs and a sense of resignation that Obama and congressional Republicans simply can't agree on ways to cut it after some failed attempts in recent years. At 2.9 percent of the size of the economy, most economists don't believe the deficit is very worrisome in the short term.
But the picture over the long run is more dire, CBO says in its report. As deficits rise over the decade and the national debt grows, interest rates are likely to be forced up, economic growth could slow, and policymakers may have no choice but to raise taxes and cut spending more sharply than if they acted now.
Deficits would rise to about 5 percent of gross domestic product within 10 years, CBO expects, and the resulting debt could cause big economic problems.
"Such high and rising debt would have serious negative consequences for the nation," CBO said.