WASHINGTON -- The Congressional Budget Office reduced its estimate of the U.S. budget deficit for the current fiscal year Tuesday but said sluggish economic growth and stubbornly high unemployment will cause the improvement to be short-lived.
The CBO said the deficit will fall to $514 billion in the fiscal 2014 year that ends Sept. 30, down from its previous estimate of $560 billion and a fiscal 2013 deficit of $680 billion.
The deficit will decline further to $478 billion in fiscal 2015, the CBO said, but the gap for that year will be $100 billion larger than previously estimated.
The deficits will start to grow steadily thereafter as the economy struggles with an unemployment rate that fails to fall below 6.0 percent until late 2016, the nonpartisan budget referee agency said.
The report may take some immediate pressure off Congress for further deficit reduction, but makes clear that there are still major fiscal challenges ahead associated with the cost of caring for the fast-retiring Baby Boom generation and a chronically low participation in the labor force among Americans.
The CBO sharply cut its projections of U.S. GDP growth in 2015 by a full percentage point to 3.4 percent, where it also stays for 2016, down nearly a full point from the CBO's previous estimates.
"CBO estimates that the economy will continue to have considerable unused labor and capital resources, or 'slack' for the next few years," the agency said in the report.