The US government ran a monthly budget surplus last month, putting it on course to record the lowest annual deficit since 2008.
The Treasury Department said on Friday that its surplus last month totaled US$71 billion, following a US$130 billion deficit in May. The government also ran a surplus in June last year, bolstered by dividends from Fannie Mae, the mortgage giant under federal conservatorship for the past six years.
For the first nine months of the budget year, the deficit totals US$366 billion, down 28 percent from the same period ilast year. Tax receipts are up 8 percent compared to the prior year-to-date, while spending has increased 1 percent.
The US Congressional Budget Office (CBO) is forecasting a deficit of US$492 billion for the full budget year ending Sept. 30. That would be the narrowest gap since 2008.
In 2008, the government recorded a deficit of US$458.6 billion, which was the record high for deficits up to that time.
However, with the outbreak of the recession, deficits soared to unprecedented levels, exceeding US$1 trillion for four consecutive years. Tax revenues fell during that period, while government boosted spending in an attempt to stabilize the financial system and provide relief to people who had lost jobs.
The yearly deficit peaked at US$1.4 trillion in 2009 during the worst of the financial crisis. It gradually fell from there, plunging to US$680.2 billion last year.
Over the next decade, the CBO is projecting that the deficits will total US$7.6 trillion.
The deficit should fall to US$469 billion next year before rising again and topping US$1 trillion annually starting in 2023, according to the CBO. Spending on the government’s major benefit programs, including social security and Medicare, should drive those increases as more baby boomers retire.
Republicans have accused US President Barack Obama of failing to propose significant cost cuts to reduce soaring entitlement costs. Democrats counter that Republicans would rather impose sharp cuts on needed government programs than impose higher taxes on the wealthy.
Neither side is expected to make major concessions in this congressional election year.
However, the budget wars of the past three years have subsided at least for a brief time.
An agreement was reached in December on the broad outlines for spending over the next two years. The agreement will allow Washington to avoid the gridlock that culminated in October’s 16-day partial shutdown of the government.
The budget ceasefire also includes legislation that will suspend the government’s borrowing limit through to March 15 next year.
That puts off another battle over raising the debt ceiling until a new Congress takes office in January.