Deficit Deal Less Likely as US Fiscal Health Improves

Members of Congress and White House officials say a shrinking deficit has taken off the pressure to reach a deal on long-term budget shortfalls.

According to The Wall Street Journal, Congress may put off debate over the deficit until after the 2014 midterm elections, given that the deficit has shrunk from more than more than $1 trillion annually over the past four years to $642 billion in May.

In addition, Medicare trustees said on Friday that spending increases have slowed for the health program for the elderly, also easing deficit worries.

"The intensity that has been there is not present today," Tennessee Republican Sen. Bob Corker told the Journal. "I sense it in Congress and around the country — almost a fiscal fatigue that has set in."

Despite public statements by the White House that the president remains optimistic about reaching a bipartisan agreement on long-term deficits, one White House source admitted to the Journal that "there doesn't seem to be the real political will to do it."

With the pressure off to reach a broad agreement reining in future deficits, lawmakers face an unclear path to resolving two other fiscal issues that must be addressed in the coming months: federal spending for the next fiscal year and raising the government's borrowing limit this fall.

In absence of a broader budget agreement, Congress is likely to resort to a stopgap spending bill to keep the government running in the short term, but this comes with some fallout both for Obama and for the Congress.

The president likely will lose momentum on his plan to boost public spending for a short-term economic stimulus, while lawmakers could be thwarted from pressing forward with an overhaul of the tax code.