US on track for narrowest budget gap since 2008
May 14, 2014, 12:08 am TWN
WASHINGTON--The U.S. government ran a big surplus in April, thanks to a flood of tax payments that helped keep the budget on track for the lowest annual deficit in six years.
The Treasury Department said Monday that April's surplus totaled US$106.9 billion, down slightly from last April's US$112.9 billion surplus. The government typically runs a surplus during April, when individual tax returns are due and corporations make quarterly tax payments.
Through the first seven months of the 2014 budget year, which began Oct. 1, the deficit totals US$306.4 billion. That's down 37 percent from the same period last year.
The Congressional Budget Office is forecasting a deficit of US$492 billion for the full budget year. That would be the narrowest gap since 2008.
In 2008, the government recorded a deficit of US$458.6 billion, which was the deficit up to that time. But that record was soon eclipsed as the government ran annual deficits surpassing US$1 trillion for the next four years. Those deficits reflected a deep recession. The downturn reduced tax revenue and increased government spending to stabilize the financial system and pay benefits for people who had lost jobs.
So far this budget year, revenue totals US$1.74 trillion, up 8.2 percent from the same period in 2013. Revenue has been boosted by a stronger economy, which means more people working and paying taxes, thereby reducing the deficit.
Government spending totals US$1.6 trillion, down 8.2 percent from a year ago. The decline reflects efforts by Congress and the administration to trim spending.
After peaking at US$1.4 trillion in 2009, the deficit has been falling. Last year, it dropped to US$680.2 billion.
Over the next decade, CBO is projecting that the deficits will total US$7.6 trillion, US$286 billion less than it projected in February. The biggest factor in the improvement is US$165 billion less in projected spending on health insurance subsidies for policies sold through exchanges created by the Affordable Care Act. Those policies are proving less costly than CBO originally thought, mainly because of tighter management of treatment options.
The CBO is forecasting that the deficit will fall to US$469 billion in 2015 before rising again and topping US$1 trillion annually starting in 2023. The increases will be driven by spending on the government's major benefit programs, including Social Security and Medicare, as baby boomers retire.
Republicans have accused Obama of failing to propose significant cost-cutting measures to reduce soaring entitlement costs. Democrats counter that Republicans would rather impose sharp cuts on necessary government programs than impose higher taxes on the wealthy.
Neither side is expected to make major concessions in this congressional election year. But the budget wars of the past three years are likely to subside this year after an agreement was reached in December on the broad outlines for spending over the next two years. The agreement will allow Washington to avoid the showdowns that culminated in October's 16-day partial shutdown of the government.
The cease-fire in the budget wars also includes legislation that will suspend the government's borrowing limit through March 15 of next year. The puts off another battle over raising the debt ceiling until a new Congress takes office in January.