According to the Monthly Treasury Statement, the US government reported a budget surplus of $116.5B, which is the widest surplus since April 2008. Moreover, June’s surplus was the largest on record for that month and was also higher than the $115 billion surplus expected by the CBO and by economists surveyed by Bloomberg.
Revenue climbed 10.2% YoY to $286.6B, while outlays plunged 46.8% YoY to $170.1B. As a consequence, the difference between the surplus in June and deficit last year at the same period was $176.24B.
Rising incomes with improving economy and tax increases enacted earlier in the year helped cause government receipts to rise. As an example, since October 2012, (beginning of the current fiscal year), the economy has added 1.84 million of jobs (204K/month). On the other side, government spending plunged due to package of spending cuts passed in January (fiscal cliff) and March (sequestration). As an illustration, Gross outlays at the Department of Defense and for military programs, are down about 7 percent in the fiscal year to date from the same period a year earlier.
That has made overhauling public pension and healthcare systems a little less pressing. Indeed, although the US government is still $510B in the red with three months to go in the fiscal year, June’s surplus will buy it time before it runs up against the limit on borrowing set by Congress. CBO expects the Treasury to hit the debt ceiling by October or November.
Nevertheless, people need to know that several exceptional factors helped to boost the surplus in June as government owned mortgage firms, Fannie Mae and Freddie Mac, added $66.3bn in payments (they have been in public ownership since 2008) and calendar effect was favorable.
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“Some of the swing in the budget in today’s report for June will be exaggerated by calendar quirks and a payment from Fannie Mae, but the trend is clearly toward improvement,” said High Frequency Economics’ Jim O’Sullivan before the statement was released.