On January 27, 1994, the Congressional Budget Office (CBO) issued its Budget Outlook for Fiscal Years 1995-1999. In a similar report issued last year, the CBO predicted the deficit would soar above $350 billion by fiscal year 1998. In the newest report, it predicts the deficit will fall from $233 billion in the current year to below $170 billion in 1996, then creep up to around $200 billion in 1999. It expects growth to continue at a moderate rate, unemployment to decline gradually, and interest rates to edge up. The consumer price index is expected to grow at an annual rate of approximately 3% through 1995.
Unemployment is projected to decline from 6.4% in December 1993 to 6.0% at the end of 1995. The increase in interest rates will be in short-term rates where the CBO expects Federal Reserve actions will increase three-month Treasury bill rates from 3.1% at the end of 1933 to 4.5% at the end of 1995.
The CBO attributes the dramatic improvement in the deficit to the enactment in August of the Omnibus Budget Reconciliation Act of 1993 (OBRA '93). While most Democrats probably agree with that assessment, some Republicans disagree and attribute the improvement to factors such as technical adjustments, including lower savings and loan bailout estimates. …