U.S. Budget Gap Narrows as Stronger Growth Boosts Revenue
The U.S. budget deficit narrowed in August from a year earlier as a stronger job market boosted revenue, propelling the world’s largest economy toward its smallest annual shortfall since 2008.
Outlays exceeded receipts by $147.9 billion last month, compared with a $190.5 billion gap in August 2012, the Treasury Department said today in Washington. In the 11 months through the fiscal year that ends Sept. 30, the deficit was $755.3 billion, the narrowest for that period in five years.
An accelerating economy and a payroll tax increase are lifting receipts, while the across-the-board federal budget cuts known as sequestration combined with lower unemployment-benefit payments keep spending in check. For the full fiscal year, the gap will be even smaller because September is expected to be a surplus month, the Congressional Budget Office said this month.
“It’s a story of improved economic conditions, which provided more revenue to the government,” said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York. “But it’s also a story of sequestration, which lowered the spending for this year.”
The median estimate in a Bloomberg survey of 19 economists was for a $146 billion deficit in August.
Today’s report showed revenue rose 3.6 percent in August to $185.4 billion from the same month a year earlier. Spending totaled $333.3 billion compared with $369.4 billion a year earlier, it showed.
As congressional Republicans demand further cuts, including defunding of President Barack Obama’s health-care law, lawmakers can’t agree on fiscal year 2014 spending levels, risking a government shutdown after the current fiscal year ends Sept. 30.
The government is also near its $16.7 trillion debt limit that Treasury Secretary Jacob J. Lew urged Congress to increase. Otherwise, the government will exhaust borrowing authority in mid-October, Lew said in a Aug. 26 letter to lawmakers. At that point, the government would have about $50 billion in remaining cash that would be “insufficient to cover net expenditures for an extended period of time,” Lew wrote.
The volatility of tax revenue makes it difficult to predict the exact date the government won’t be able to pay its bills, said the Bipartisan Policy Center, a Washington-based analyst group that follows the issue.
American employers added 169,000 workers last month, according to a Labor Department report on Sept. 6. Unemployment fell to 7.3 percent, the lowest since December 2008, as workers left the labor force.
The CBO on Sept. 9 predicted that the 11-month deficit would shrink to $753 billion, with the August shortfall narrowing to $146 billion.
The last year’s deficit of $1.09 trillion was the fourth largest since World War II and compared with $1.3 trillion in 2011. It reached $1.42 trillion, the highest ever, in 2009.
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