U.S. Budget Balance outlook

According to the latest CBO projections, the U.S. budget deficit will rise from the equivalent of 2.5% of GDP in FY2015 to 3.7% of GDP in FY2020 and 4.6% in FY2025. The core condition behind this projection is GDP must be slightly above 2.0% per year through 2025.

Such forecast is more pessimistic than the previous August 2015 projection, which showed the deficit rising to 3.1% of GDP in FY2020 and to 3.4% of GDP in FY2025.  The main reason behind such revision is laws enacted since last August that will increase spending and reduce corporate and individual taxes. 

These include "tax extenders" and other changes that had seemed fairly likely last August but were not yet current law. Another reason is downward revision of economic forecast. A lower forecast for real GDP growth reduced government revenues by more than it reduced outlays. 

Same way Increased estimates of Medicaid spending for beneficiaries under the Affordable Care Act and for veterans' disability compensation is also responsible for the revision.