White House foresees steady growth, falling deficit

WASHINGTON (AFP) - The White House projected a steady fall in the US deficit over the next decade while the economy grows moderately, as it released its budget for the 2015 fiscal year on Tuesday.

The budget foresees the American economy growing by 3.1 per cent this year and by 3.4 per cent the next, with inflation remaining under control, rising to only 2.0 per cent in 2015.

"Building on the progress already made, the budget's deficit reduction measures are more than enough to achieve the key fiscal goal of stabilising the debt as a share of GDP," the document said.

The budget projects steady progress in building income, so that the government can reach a primary surplus - spending excluding debt service - by 2018.

The White House's modestly expansive budget will almost certainly be blocked in Congress, because it contains certain tax increases and spending rises that Republicans have already rejected outright.

But it offers a view that the country's budget deficit, which boomed after the 2008 crisis, can be quickly brought down to comfortable levels, falling to US$564 billion (S$716 billion), or 3.1 per cent of GDP, in the fiscal year beginning October 1 and to 2.2 per cent of GDP by 2020.

The budget for the year beginning October 1 is projected at US$3.9 trillion, up 6.8 per cent from the current year.

Discretionary spending - the third of the budget that excludes mandatory programs like social security and medicare - barely is changed at US$1.014 trillion, because of prior agreements with Congress.

The White House said that the government needs to increase its revenue to maintain commitments to retirees and seniors while continuing to invest in the economy itself.

"The budget secures that revenue through tax reform that reduces inefficient and unfair tax breaks and ensures that everyone, from Main Street to Wall Street, is paying their fair share," it said.

The budget's longer term outlook also sees the country's huge debt burden falling steadily.

While the absolute level of US debt - now US$17.3 trillion - will keep rising to cover the persistent deficit, its ratio to the overall size of the economy will fall, from nearly 75 per cent this year to 69 per cent by 2024.