U.S. Budget Deficit On Course For Five-Year Low As Fiscal Debates Heat Up
On Thursday, the U.S. Treasury reported a 35 percent decrease in the U.S. budget deficit from just one year ago. As the budget year comes to an end on September 30, this year is on course to have the smallest deficit in five years.
The federal deficit—the difference between government spending and tax revenues—was reported at $755 billion in August. At the same time last year, the federal deficit had reached $1.2 trillion. In fact, the U.S. government is expected to run a surplus for the month of September, according to the Congressional Budget Office, which would slash the annual deficit to $642 billion.
The Associated Press reports, “Steady economic growth has put more people back to work and boosted corporate profits. And Social Security taxes rose at the beginning of the year, along with income tax rates on wealthier Americans. Both trends have raised tax revenue. In August, the government collected $185 billion in taxes, up 4 percent from the same month a year earlier.”
While revenue has increased, government spending has decreased. August spending was $333 billion, a 10 percent decrease from one year earlier.
This report comes as Congress prepares for a heated round of fiscal negotiations. The federal government is set to shut down on October 1 unless Congress passes a continuing resolution to fund it, and the government will hit its borrowing limit on October 18, necessitating an increase in the debt ceiling.
On Thursday, House Speaker John Boehner (R-OH) asked the Obama administration and Democratic leaders to help him reach a compromise with Republicans to avoid the October 1 deadline. “It’s time for the president’s party to show the courage to work with us to solve this problem,” he said.
Earlier this year, the vote to raise the debt ceiling was halted when Democrats and Republicans couldn’t come to an agreement that increased revenues, as the Democrats requested, and cut government spending at the levels that Republicans demanded.
Forty-three House Republicans plan to introduce legislation that would channel funding to the Pentagon and veterans, but leave Obamacare out of the budget for at least one year. These 43 Republicans are expected to impede any negotiation between the two parties on debt negotiations unless the health care law loses its funding.
Senate Majority Leader Harry Reid (D-NV) spoke to this issue on Thursday. “I had to be very candid with [Speaker Boehner] and I told him directly, all these things [these Republicans] are doing on Obamacare are just a waste of their time,” Reid said. “Their direction is in the direction toward shutting down the government.”
Treasury Secretary Jack Lew insisted that President Obama is “not going to be negotiating over the debt limit. Congress has already authorized funding, committed us to make expenditures. We’re not in a place where the only question is, will we pay the bills that the United States has incurred?”
Congress has roughly one month to either increase the debt limit or allow the federal government to fall approximately $106 billion short of the money it owes by November 15, essentially forcing the U.S. to default on its loans. If they fail to reach a compromise, the consequences of failing to raise the debt limit will be far more severe than simply reversing the progress that has already been made in reducing the deficit.
Photo: Robert Reed Daly via Flickr.com
H/T: ABC News