There is a quiet murmur in financial circles that the United States government may be headed once again toward a surplus budget, opined 24/7Wall Street.com yesterday. That has not happened since the final few years of the Clinton administration and during George W. Bush's first year in office. However, Bush managed to decimate the budget surplus in short order, with the first of his two inadvisable tax cuts. Add to that the launching of two wars in Afghanistan and Iraq. Counting the increased government expenditures incurred by the Bush administration it all added up to record deficits that at the end of the Bush years, the economy was damaged and went into a deep recession.
Going forward, government expenditures are expected to stay under control, led by reduced military spending because of the wind down of the two wars, and the expiration of the Emergency Unemployment Compensation program.
The improving economy means increased numbers are returning to work, thus increasing tax revenues. The most recent Bureau of Labor Statistics released showed total nonfarm payroll employment increased by 288,000, dropping the unemployment rate to a declining to 6.1 percent. The unemployment rate is the best since Sept. of 2008.
Adding fuel to the argument of the returning budget surplus during the Obama administration is a report from the Congressional Budget Office (CBO), that said the United States federal government had a budget surplus of $70 billion in the month of June (2014). That surplus eclipses the budget surplus from last June (2013).
Marketwatch reported that the CBO reported receipts in June (2014) that were $324 billion, $37 billion more than in June 2013. Spending came in at $253 billion in June, $83 billion more than a year ago. For the fiscal year to date, the total deficit is $366 billion, $144 billion less than in the same nine months of fiscal 2013.
The Congressional Budget Office (CBO) recently estimated that the federal deficit through the first nine months was $366 billion, which was significantly better than the $510 billion deficit for the same period during the 2013 fiscal year. The primary reason for the improvement was receipts, which improved by $172 billion.
Total receipts were up by 8 percent in the first nine months of fiscal year 2014 and were lead by individual income taxes and social insurance (payroll) taxes, which together rose by $123 billion, or 7 percent.
In addition, receipts from corporate income taxes rose by $29 billion (or 14 percent), because of growth in taxable profits in calendar years 2013 and 2014. Receipts from April through June—largely representing corporations’ first two quarterly estimated tax payments for the 2014 tax year—increased by about $12 billion (or 11 percent).
Also, receipts from the Federal Reserve rose by $18 billion, or 32 percent. The increase was attributable in part to the larger size of the central bank’s portfolio of securities and to a higher yield on that portfolio. Almost all gains occurred from January through June.
Total outlays were up only 1 percent. A couple of areas saw higher than average increases, including spending for Social Security benefits, which rose by $28 billion (or 5 percent). Also outlays for two low-income health programs—Medicaid and the subsidies for health insurance purchased through the exchanges created under the Affordable Care Act (included in “Other Activities” in the table below)—were $27 billion (or 13 percent) higher in 2014 than they were for the same period in 2013, largely because some of that law’s provisions took effect in January 2014.
In addition, outlays for student loans (also included in “Other Activities”) increased by $20 billion because the Department of Education made upward revisions this June.
One other area that saw an increase: payments made by Fannie Mae and Freddie Mac to the U.S. Treasury, which were $14 billion less than they were last year.
Areas seeing a decrease in outlays were total spending for military activities of the Department of Defense fell by $26 billion (or 6 percent).
Outlays for unemployment benefits declined by $19 billion (or 34 percent), mostly because fewer people have received those benefits since the Emergency Unemployment Compensation program expired at the end of December 2013 and Congress has not passed an extension.
Outlays of the Federal Deposit Insurance Corporation (FDIC, included in “Other Activities” in the table below) declined by $15 billion for a couple of reasons. Financial institutions did not pay premiums to FDIC during the first half of fiscal year 2013, because they had prepaid those premiums in fiscal year 2010. Second, in June 2013, FDIC refunded excess insurance premiums that had previously been paid by certain institutions; no such refund occurred in 2014.
Another area of decreased spending was the Department of Homeland Security, which fell by $13 billion (or 29 percent), mostly because outlays for flood insurance and disaster relief were smaller than they were in the first nine months of fiscal year 2013.
Look backward, the full year of 2013, the budget deficit fell to a five-year low of $680 billion, with GDP as a percent of deficit falling steeply to 4.1%.
When President Obama came into office, the deficit as a percent of GDP was 9.2%. This steep drop represents a reduction of more than half from the deficit that the Administration inherited when the President took office in 2009.
The Congressional Budget Office (CBO) is projecting that future deficits as a percent of GDP will fall even further, with the 2015 deficit expected to come in at 2.1.
The deficit reduction from 2009 until 2013 represents the fastest decline in the deficit over a sustained period since the end of World War II.
The Obama Administration has achieved more than $2.5 trillion of deficit reduction over the next decade, through a combination of spending cuts and revenue increases from asking the wealthiest to pay their share.
The huge drop is simply a combination of higher revenues, coupled with increased revenues. A stronger economy has also been a factor, as revenues increase as more Americans return to work.