CBO projects a $188 billion decrease in this year's federal budget deficit, but debt would then grow

The Congressional Budget Office says it expects the federal budget deficit to drop by $188 billion this fiscal year to $1.5 trillion

WASHINGTON -- The Congressional Budget Office said Wednesday that it expects the federal budget deficit to drop by $188 billion this fiscal year to $1.5 trillion, a short-lived dip as the annual shortfall is likely to rise over the next nine years.

Two major factors are behind the decline in the budget deficit this year, each of them one-off events that reflect the challenge for lawmakers in trying to close the growing gap between tax revenues and spending.

First, the current fiscal year started on an October weekend, which caused its payments to be booked in fiscal 2023 without offsetting revenues.

Second, tax revenues are expected to increase because of better returns on financial investments and the collection of taxes from last year that the government postponed because of natural disasters.

Over the next decade, the cumulative budget deficits will be 7% smaller than the nonpartisan CBO forecast last year. That's mainly because of an agreement President Joe Biden signed last summer with Congressional Republicans that temporarily lifted the statutory debt ceiling in exchange for restrictions on government spending. But also, economic growth looks stronger than what was forecast and more people are working.