The US posted its widest budget surplus in five years last month as an improving economy swelled tax revenue, easing pressure on lawmakers to lift the nation’s debt ceiling.
The surplus for the month when tax payments are due increased to US$112.9 billion, the biggest since April 2008, from US$59.1 billion a year earlier, the US Treasury Department said in its monthly budget statement on Friday in Washington.
A strengthening economy is helping narrow a US fiscal deficit that has exceeded US$1 trillion in each of the past four years and pushed the Treasury Department near its legal borrowing limit. US employers added 1.4 million workers in the period from October to last month, boosting government revenue and reducing the need to sell debt.
“This receipts surge has bought the Treasury a lot of time to stay under the debt limit,” Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said in an interview. “Without the pressure of the debt limit, players in Washington have little incentive to come to a debt deal.”
For the first seven months of the past financial year that began Oct. 1, the deficit shrank 32 percent to US$487.6 billion from the same period from a year before.
Friday’s report showed revenue rose 28 percent last month from the same month a year earlier, to US$406.7 billion. Spending increased 13 percent to US$293.8 billion, it showed.
The debt limit will increase on May 19 to account for the deficits that accrued during the suspension period.
The Treasury will then have to use its extraordinary measures to extend its borrowing authority and keep paying bills, unless the limit is raised or suspended again.
US Treasury Secretary Jack Lew, in an interview on CNBC earlier on Friday, said the US$59.4 billion dividend that Fannie Mae, the mortgage-financier seized by US regulators in 2008, will pay the Treasury by the end of next month will help avoid breaching the limit until at least Sept. 2.
The US Treasury on April 29 projected it will pay down some of the government debt this quarter for the first time in six years as tax receipts exceed forecasts and spending diminishes.
The department has kept its quarterly refunding auctions of debt unchanged at US$72 billion since November 2010.
While forecast to decline to US$430 billion in 2015, the US’s annual deficit will start growing again later this decade and reach close to US$1 trillion in 2023, as more baby boomers join the ranks of Medicare and Social Security beneficiaries, the US Congressional Budget Office said in February.