The Obama administration Monday said it expects this year’s annual budget deficit to come in sharply lower than it previously forecast, a development that officials used to make the case that deep cuts to spending should be reversed.
But the administration also acknowledged that the deficit is smaller this year partly because of those deep cuts, known as sequestration, which has been slicing billions from domestic and defense programs since it started taking effect March 1.
In its midyear review, the Office of Management and Budget said the deficit this year is expected to be $759 billion — $214 billion less than it had forecast in April, when President Obama released his 2014 budget plan. The administration counts $43 billion in reduced spending on defense and domestic programs — largely the result of sequestration — as contributing to the smaller deficit.
Other factors included much higher tax revenue in a year when a variety of taxes went up and an unusual payment from the federally backed mortgage finance giants Fannie Mae and Freddie Mac as a result of their improving financial condition.