WASHINGTON (REUTERS) - The Congressional Budget Office on Tuesday reduced its estimate of the United States budget deficit for the current fiscal year 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 US$514 billion (S$655.5 billion) in the fiscal 2014 year ended Sept 30, down from its previous estimate of US$560 billion and a fiscal 2013 deficit of US$680 billion.
The deficit will decline to US$478 billion in fiscal 2015, but start to grow thereafter as the economy continues to struggle with an unemployment rate that fails to fall below 6.0 per cent until late 2016. The number of workers who are not participating in the labour force also will remain historically high, holding down revenue gains.
President Barack Obama's signature healthcare law will contribute to this phenomenon, CBO said, citing new estimates that the Affordable Care Act will cause a larger than-expected reduction in working hours - eliminating the equivalent of about 2.3 million workers in 2021 versus a previous estimate of an 800,000 decline.