White House Lowers Budget Deficit Projections
The Clinton administration yesterday predicted that this yearÛªs federal budget deficit will shrink from last yearÛªs record $290 billion, rather than topping it by nearly $25 billion as it forecast last spring.</br></br>In its mid-session budget update, the administration also said that passage of its $500 billion budget and tax package, a large drop in long-term interest rates that has lowered the cost of financing the national debt, and other factors will combine to trim the deficit to about $180 billion by 1996.</br></br>Since the economy is expected to grow in the meantime, the size of the deficit relative to that of the economy will be cut nearly in half by then, from</br></br>The principal reason the deficit will narrow to about $285 billion in the current fiscal year, which ends Sept. 30. is that the governmentÛªs cost of preventing losses to insured depositors at failed financial institutions is coming in nearly $30 billion lower than expected, the update said.</br></br>Congressional reluctance to provide more money to close insolvent thrifts is part of the reason for the savings. But most of it is due to the fact that lower interest rates have enabled some troubled institutions to stay in business, and have reduced losses even at failed institutions.