WASHINGTON -- The federal budget deficit will be $20 billion higher in fiscal 1999 than originally projected unless Congress gets health care spending under control, the Congressional Budget Office reported this week.
In its updated economic and budget outlook, released late Wednesday, the nonpartisan budget office revised its January figures and projected that the deficits for fiscal years 1994 through 1996 will be lower than anticipated because of unexpectedly strong economic growth.
However, unless Congress suppresses the increasing costs of mandatory health care spending, specifically Medicare and Medicaid, the CBO said that the deficit will begin to climb again slowly by the mid-1990s and then "pick up steam in 1999."
Without cost containment measures, the two health care programs together will grow at a rate of 11% annually, the budget office said, while all other federal programs are projected to grow less than 4% a year.
The report details the growth in health costs, but makes no recommendations to Congress on how to control the costs. The CBO said it is uncertain what immediate effect the pending health care reform legislation would have on the economy, but said any attempts to control costs would be good for the deficit in the long run.
The deficit for fiscal 1994, which ends Sept. 30, is now projected at $202 billion, $26 billion less than the CBO predicted in January. The fiscal 1995 deficit is projected at $162 billion, $17 billion less than estimated earlier.
The White House released its revised budget projections, commonly known as the mid-session review, in July and predicted lower deficits as well, but the administration's were more conservative than the CBO's.
The administration's estimates put the fiscal 1994 deficit at $220.1 billion, $15 billion less than its February projections and about $18 billion higher than the CBO's estimates. The administration's fiscal 1995 deficit is projected at $167 billion, or $9 billion less than originally estimated and $5 billion higher than the CBO's.
At the time, White House chief of staff Leon E. Panetta credited the lower deficit projections to President Clinton's fiscal 1994 budget blueprint, saying the revised projection "makes very clear that the president's economic plan is not only working, it is working beyond our greatest expectations."
The budget office also credits the Omnibus Budget Reconciliation Act of 1993 with turning the tide on the immediate growth of the federal deficit.
"The current low levels of the deficit should be appreciated as the fruits of the spending reductions and tax increases enacted" in the deficit reduction act, according to the report.
The reduced deficits in turn helped spur economic growth to higher levels than originally projected, which prompted the CBO to push its real growth forecast in the 1994 calendar year to 3.6% -- an increase of almost 1%. The administration projected 1994 growth at 3%.
Both the budget office and the White House projected real growth in calendar 1995 at 2.7%, no change from earlier forecasts.
The CBO and White House revised estimates also agreed that the deficit as a percentage of gross domestic product will continue to fall from a high of 4.9% in 1992. The budget office predicts 2.3% in 1995 and the White House predicts 2.4%.