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CBO: US Deficit Slumped in October and November Compared to Last Year

On December 6th, CBO (Congressional Budget Office) published its projections concerning federal government budget in October and November. According to their estimates, the federal government ran a budget deficit of $231 billion for the first two months of fiscal year 2014, $61 billion less (-21%) than the shortfall recorded in October and November of last year.


More from CBO:


The federal government ran a budget deficit of $231 billion for the first two months of fiscal year 2014, $61 billion less than the shortfall recorded in October and November of last year, CBO estimates.
Receipts for the first two months of fiscal year 2014 totaled $380 billion, CBO estimates—$34 billion more than receipts during the same period last year.
Outlays for the first two months of fiscal year 2014 were $27 billion less than they were during the same period last year, CBO estimates.

These figures show that the deficit keeps on falling sharply so that the most recent CBO projection which puts the fiscal 2014 deficit at 3.3% of GDP, down from 4.1% in fiscal 2013, should be revised downward in the coming months. The fact is that the decrease of outlays would have been slightly larger if not for shifts in the timing of certain payments from December to November (because December 1 fell on a weekend in both years).

US Deficit Narrowed From Last Year On Record Revenue For October

According to the Monthly Treasury Statement, the US government reported a deficit of $91.6 billion in October. These figures were lower than the $102 billion deficit expected by economists surveyed by Bloomberg.


Revenues climbed 8.0% YoY to $198.9B (strongest October revenues to date), while outlays fell 4.5% YoY to $290.52.4B. As a consequence, the deficit decreased by 23.6% compared to last year at the same period.



Rising employment, house prices and a payroll tax increase supported receipts while budget cuts combined with lower unemployment-benefit payments restrained outlays. Last month, the Treasury said the shortfall in fiscal 2013 was 4.1 percent of GDP. In the meantime the Congressional Budget Office projected it will decline to 3.3% this fiscal year and 2.1% in 2015.


Note that October figures also improved due to a partial government shutdown during the first half of the month which was suspended Oct. 17. The agreement to reopen operations created a House-Senate conference committee with a Dec. 13 deadline to offer ways to resolve the fiscal disputes between the parties.


The October figures offer a 29-member congressional panel a little room to maneuver during talks on government spending for the rest of the fiscal year. House and Senate negotiators met yesterday as part of an effort to write a budget in the coming weeks and were somehow optimistic concerning a potential compromise.

CBO Issues Updated Budget Projections for FY13 to FY23

CBO estimates that if the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $642B, the smallest shortfall since 2008. Relative to the size of the economy, the deficit should reach  at 4.0% of GDP which will be less than half as large as the shortfall in 2009, which was 10.1% of GDP.
Because revenues, under current law, are projected to rise more rapidly than spending in the next two years, deficits in CBOs baseline projections continue to shrink, falling to 2.1% of GDP by 2015.
However, budget shortfalls are projected to increase later in the coming decade, reaching 3.5% of GDP in 2023, because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt.
CBOs estimate of the deficit for this year is about $200B below the estimate that it produced in February 2013, mostly as a result of higher-than-expected revenues and an increase in payments to the Treasury by Fannie Mae and Freddie Mac.
For the 2014-2023 period, CBO now projects a cumulative deficit that is $618B less than it projected in February. That reduction results mostly from lower projections of spending for Social Security, Medicare, Medicaid, and interest on the public debt.