With all the talk of budget deficits and increased red ink in Washington, skeptics and others will be happy to hear that the federal government reported today, February 12, 2013, that it ran a surplus for the month of January, 2013. It is the first surplus since last year in April- a month that commonly sees surpluses due to greater tax receipts leading up to tax day.
According to the Treasury Department, the federal government reported tax revenues that were $2.9 billion ahead of expenditures for the recent month end. The budget year, which begins on October 1 of each year, is now projected to show a $845 billion dollar deficit, based on official numbers from the Congressional Budget Office. If these forecasts hold true, it will represent the smallest budget deficit since President Barack Obama took office.
January’s run- up in revenue was better than expected, but not entirely surprising. After all, the Social Security tax rate was returned to its previous 6.2 percent level and federal tax withholding was increased on the wealthiest Americans. The combination of the two tax increases pushed the federal government into the black for the month and reduced the overall budget- year deficit down to $290.4 billion, a figure almost $60 billion lower than the same period one year ago.
An expanding job market, however slow the growth may be, is also helping to keep deficits in check. Job growth averaged about 180,000 per month last year and is projected to be even larger this year. With more people working, federal revenues will be greater than before. This should contribute to a lower monthly budget deficit for each of the remaining months of 2013.
Looking forward to future years, deficits are expected to continue their downward trend. The Congressional Budget Office predicts a $616 billion deficit in 2014 and $459 billion in 2015. However, additional spending and worries regarding Social Security, the retirement of more baby boomers, and increased health spending could push deficits higher than expected. Further spending cuts in Washington and greater compromises between Democrats and Republicans will be necessary to tame the budgetary beast and reduce the flow of red ink for the next several years.
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