US budget deficit expected to rise in October

The Treasury Department releases a report on the federal budget for October. The release will is expected at 2 p.m. EST Thursday.

BUDGET DOWN: The Congressional Budget Office expects the deficit for October will total $122 billion. That would be higher than a year ago but the increase reflects calendar quirks which required the government to make about $43 billion in benefit payments last month that normally would not have been paid until November.

If not for these timing shifts, CBO estimates last month's deficit would have been $11 billion less than a year ago.

The $483 billion deficit for 2014 was the smallest imbalance since 2008 and, when measured against the size of the economy, is below the average deficits of the past 40 years. The deficit equaled 2.8 percent of gross domestic product, which is the economy's total output of goods and services. By comparison, the deficit for 2013 was $680 billion, or 4.1 percent of GDP.

The 2014 deficit meant the government borrowed 14 cents of every dollar it spent. Six years ago, that figure was 40 cents of borrowing for each dollar spent.

That sizable borrowing reflected deficits that topped $1 trillion annually for four consecutive years from 2009 to 2013 as the government struggled with a deep recession, which cut into tax revenues and drove spending higher for safety-net programs such as unemployment benefits and food stamps.

The retirement of those in the baby boom generation is projected to push the deficit higher in coming years. The Congressional Budget Office warns that the current trajectory is unsustainable and eventually could lead to a fiscal crisis.

For now, slow growth in government spending, including on health care, and increased tax revenues have combined to produce rosier deficit numbers.

Much of the slower growth in spending was due to lower-than-expected health care costs as well as a 2011 budget pact with Republicans that sharply curbed agencies' operating budgets. Obama reached agreement with Republicans in Congress for a tax increase on upper bracket earners at the beginning of 2013.

Since the tax increase at the beginning of 2013, the GOP-controlled House and Obama have steered clear of further large-scale efforts to reduce the deficit. Instead, a budget deal last December reversed agency budget cuts known as sequestration.

But with Republicans winning control of the Senate in November's elections, the GOP is expected to try to rein in the deficit even further. However, Obama has said that any large-scale budget deal needs to include higher taxes, something the Republicans oppose.