US budget deficit drops
October 8, 2014
The US budget deficit dropped by nearly a third during fiscal year 2014, ending on September 30, to $486 billion (383 billion euros), a report from the Congressional Budget Office (CBO) said Wednesday.
The lowest budget shortfall in President Barack Obama's tenure, the deficit now represents 2.8 percent of the country's gross domestic product (GDP) - a figure that economists say is sustainable.
According to the CBO, preliminary estimates of the final budget data showed that outlays were up 1.4 percent from the previous year to $3.499 trillion, while receipts increased by nearly 9 percent to $3.013 trillion.
The Treasury Department will issue official reports on the final budget for fiscal year 2014 by Oct. 17.
The CBO attributed receipt growth to the recovering economy, which enabled the government to collect higher individual income taxes and payroll taxes, up 6 percent from the previous fiscal year.
"Growth in wages and salaries explains most of the increase in withheld receipts, but almost one-third of it stemmed from changes in law," the CBO said, referring to higher payroll tax rates that pushed up withholding.
The CBO also credits receipts from corporate income taxes, which soared 18 percent, indicating growth in profits. Furthermore, receipts from the Federal Reserve increased 31 percent as a result of the central bank's larger portfolio size of securities.
But some analysts believe the good news is temporary. They warn the deficit will again rise as more Baby Boomers retire, unless Washington can curb the growth of Social Security and Medicare spending.
During Obama's presidency, the US budget deficit hit a record $1.4 trillion in 2009 and then fell to $680 billion last year, as the economy recovered from the financial crisis and added more jobs.
The CBO has forecasted a $469 billion deficit for fiscal year 2015.
el/uhe (AP, Reuters, AFP)