For the first time in five years, the government is projected to have a deficit below $1 trillion, the Congressional Budget Office reported on Tuesday.
But as with the last CBO estimate of the nation's budgetary and economic outlook, estimates could shift depending on what Congress does with spending and the economy.
The report estimates that under current law the fiscal year 2013 deficit will come in at $845 billion, or around 5.3 percent of GDP. That's about half of where the deficit was in 2009. But CBO adds that debt as a share of economic output would remain at "historically high" levels—around $12.2 trillion, or 76 percent of GDP at the end of fiscal year 2013. That's the highest share of GDP that the national debt will have been since 1950, according to the CBO.
As for the broader economy, the office has sharply improved its outlook. In August 2012, the CBO predicted that the U.S. economy would shrink by 0.5 percent in 2013, with unemployment hitting 9.1 percent at the end of the year. Now, the office projects growth of 1.4 percent this year, with unemployment at 8.0 percent at the end of the year.
Though better than previous estimates, CBO's predictions still represent a bleak outlook. If the economy only grows by 1.4 percent in 2013, that's a slowdown from around 1.9 percent in 2012. And if unemployment remains above 7 percent through 2014, as the office projects, it will be 6th consecutive year with the jobless rate above 7 percent. That will make it the longest period of sustained high unemployment 70 years, the CBO says.
CBO's director Doug Elmendorf told reporters at a Tuesday press briefing that full economic recovery could be a long time in coming.
"We expect output to remain below its potential level until 2017, almost a decade after the recession started in 2007," he said.
Still, all of these estimates are contingent upon what Congress does in the coming months. The sharply positive revisions are due in large part to Congress veering away from the so-called "fiscal cliff"—stopping tax hikes for most Americans and putting off until March across-the-board budget cuts totalling $1.2 trillion over 10 years.
Often criticized by congressional Republicans who say the CBO too often skews its findings to support Obama administration policies, its latest report argues that all of the projections are conditional upon what Congress decides to do about sequestration.
If lawmakers allow across-the-board cuts to medicare, defense and other discretionary spending—or if they fail to enact a long-term debt ceiling agreement or maintain government funding—CBO would likely have to revise down its estimated economic outlook, officials say.