The Congressional Budget Office’s more positive forecast for the federal government’s budget and debt are a “positive” for the United States’ credit, Moody’s Investors Service said in a report Monday.
“The new figures in the [CBO’s] baseline scenario, based on current law and assuming no additional policy measures, show an improvement of government debt-to-gross domestic product trends over the ones presented in the agency’s February report, a credit positive for the U.S.,” Moody’s said.
In its report, which was released Friday, the CBO estimated that, during the next decade, government outlays will fall as projected costs on entitlement programs and interest on the debt will be slightly lower than earlier forecasts.
The deficit would total $642 billion in 2013 and the cumulative deficit would be $6.3 trillion over the 2014 to 2023 period, according to CBO.
The $642 billion deficit forecast for 2013 would be only 4% of GDP and $200 billion smaller than the projections CBO made in an earlier report released in February.
The smaller amount is the result of better-than-expected tax revenues particularly for individual income taxes, which are now 5% higher than in the original forecast, Moody’s said.
Also, for the first seven months of the fiscal year, total federal revenues were up 16% from the same period a year earlier.
CBO also forecast corporate tax revenues to be higher. In addition, the new federal budget numbers included a transfer of $95 billion to the Treasury from the government-sponsored enterprises, Fannie Mae and Freddie Mac.
“The improvements since February reflect a somewhat stronger economy and the improved performance of the government-sponsored enterprises,” Moody’s said.
The CBO estimated that during the next decade, government outlays will fall as projected costs on entitlement programs and interest on debt will be slightly lower than earlier forecasts.
As a result, fiscal deficits will bottom out at 2.1% of GDP in fiscal 2013 and be marginally smaller than previous projections.
Debt will peak in fiscal 2014 at 76.2% of GDP, 1.5 percentage points below the previous estimate, then fall to 70.8% in fiscal 2018.
The gap between the two paths after this year will grow to more than three percentage points by the end of the decade, Moody’s said in its report.