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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.

Greece Will Make a Primary Surplus in 2013 as “Summer Season” Keeps its Promises

After beating significantly budget targets in Jan-July period with a a primary budget surplus of about 2.5 billion euros against an interim target for a deficit of 3.1 billion for the period, a report coming from Kathimerini suggests that August revenues give reason for gov’t hope to achieve a primary surplus in 2013.

 

More from Kathimerini:

 

Budget revenues were up by about 120 million euros, or 11 percent, in the first 20 days of August, compared to the same period last year, giving the government cause for optimism.
 
As the monthly target is 3.9 billion euros, when 4.8 billion was collected in August 2012, ministers believe that at the same rate of collection the monthly target will be overshot by 300-400 million.
 
The encouraging signs this month are that income tax inflows are 50 percent higher than last year, taxes on deposit interest are up 41 percent, VAT is also up – mostly due to heightened activity in tourism – and car sales are markedly higher.

 

As a consequence, Greece should make a primary surplus in 2013 and will get at least a third aid program in 2014. We can also expect a debate on a potential haircut after the German election (September 22nd).

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.