Rising and Falling Fiscal Deficit: What Future Holds

Last updated on March 26, 2013

Analysts believe that in 2013 the budget deficit will shrink to $845 billion, which will be the lowest during Barack Obama’s presidency. Even thought that might bring a sigh of relief to many, the relief is short-lived because the deficit is expected to rise again after a few years.

The cost of health for the elderly, specifically Medicare, Social Security will be used by more taxpayers because of the Baby Boomer aging population. Because the revenues will not increase at the same pace, the deficit will begin to rise again, although more slowly.

Analysts have predicted that the U.S. deficit will touch 3.8 percent of economic output by 2023, but government health spending will decrease. Predictions are not always correct, and the focus of the Obama administration is to speed up the economic recovery without raising rates on the common taxpayer. Spending reductions coupled with curbs on tax breaks for the wealthy is what President Obama has proposed to bring the deficit down in the short-term.

 “There is no reason that the jobs of thousands of Americans who work in national security or education or clean energy should be put in jeopardy just because folks in Washington couldn’t come together to eliminate a few special interest tax loopholes or government programmes that we agree need some reform,” President Obama said last month.

Republicans have made their stance clear. Steady, but slow growth is what the Obama administration is working on because taking chances might not be suitable in an economy that is still on the way to recovery.