U.S. deficit to decline, then rise as labor market struggles: CBO

By David Lawder WASHINGTON (Reuters) – The Congressional Budget Office on Tuesday reduced its estimate of the U.S. budget deficit for the current fiscal year but said sluggish economic growth and stubbornly high unemployment will cause the improvement to be short-lived. The CBO said the deficit will fall to $514 billion in the fiscal 2014 year ended September 30, down from its previous estimate of $560 billion and a fiscal 2013 deficit of $680 billion. The deficits will start to grow steadily thereafter as the economy struggles with an unemployment rate that fails to fall below 6.0 percent until late 2016, the non-partisan budget referee agency said. The report may take some immediate pressure off of Congress for further deficit reduction, but makes clear that there are still major fiscal challenges ahead associated with the cost of caring for the fast-retiring Baby Boom generation and a chronically low participation in the labor force among Americans.