Federal Budget & Economic Forecast (p.1)

President Obama announces his annual budget

President Obama announces his FY 2017 budget

As in each year preceding, on February 9, President Obama released his annual budget for the U.S. that tops $4 trillion.  The budget outlines the current Administration’s policy proposals, budgetary projections, and economic forecasts for the next decade. This will be the last annual budget report for his administration.

The Obama Administration can be commended for controlling the federal budget deficit as the deficit has improved over the last 6 years.  But, prior to the budget announcement, the non-partisan Congressional Budget Office (CBO) released their annual Budget and Economic Outlook report saying the U.S. will be unable to sustain improving deficits in the next decade (2016-2026).  CBO’s analysis is conducted assuming current federal policies remain in place. Congressional leaders and others use the data to assess recent policy decisions and to guide future policy decisions for federal programs.

Deficit Declined, but is Not Sustainable

Even though deficits have declined since 2009, the future fiscal outlook the fiscal outlook for the U.S. is treacherous according to leading economic prognosticators. In all likelihood the policies outlined in the President’s last $4.1 trillion budget will not be sufficient to stabilize the U.S. debt over the long term. But it’s not solely this President’s fault.

A 600% Increase in Deficit?

President Obama announces federal budget planCBO projections for the next ten years show a significant increase in annual deficits for the U.S., rising from an annual average of $150 billion per year to just over $900 billion per year.

CBO said the increase in annual federal budget deficits was the results of recently enacted legislation, primarily the Consolidated (Omnibus) Appropriations Act, 2016  (P.L. 114-113) that funds all federal government agencies, the Fixing America’s Surface Transportation Act (also called the FAST Act, P.L. 114-94) that provides $305 billion over the next (likely) three years to improve America’s roads, bridges, public transit, rail transportation systems and reforms federal surface transportation programs, the Bipartisan Budget Act of 2015, a two-year budget deal that provided $80 billion in relief from future sequester cuts, the National Defense Authorization Act for Fiscal Year 2016 (P.L. 114-92) that authorizes $607 billion for the budgets of the Department of Defense, and the national security programs of the Department of Energy.

Expect A Bigger Deficit Next Year

Since 2009 the annual U.S. federal budget deficit has declined from $1.4 trillion to $439 billion in FY 2015.  But this improvement comes to a screeching halt this year!

For FY 2016 the federal budget deficit is projected to increase by $105 billion over the previous fiscal year to $544 billion. That’s because last October (2015) Congressional leaders and the White House reached an agreement to raise discretionary spending (PL 112-25) above the Budget Control Act (BCA) sequester-level spending caps by $80 billion over two years; $50 billion in 2016 and $30 billion in FY 2017.  The increase was evenly split between non-defense domestic programs and defense spending.

The budget agreement also provided $73.5 billion in war funding for the Pentagon in the Overseas Contingency Operations account for fiscal years 2016 and 2017.

About 80 conservative members of the Republican caucus in the U.S. House of Representatives are attempting to reverse last year’s budget deal through current negotiations on the FY 2017 congressional budget resolution.  It remains uncertain whether or not House Republicans can garner enough votes to pass a budget resolution this year as Republican leaders try to return the legislative chambers to normal order and pass a congressional budget resolution every year by April.

What does this mean to my organization?

Since current projections indicate rising federal deficits in the U.S. budget, we can expect that any new administration will make widespread changes to the budget.

This means that there is an opportunity for your organization to get your point of view heard by leading officials making those changes. Changes that could impact federal programs beneficial to your organization or your business.  You can make an impact on the forthcoming changes by acting NOW, IF you have the right representation in Washington.

To be continued…

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Tim Cansler