Federal Budget Deficit Falls 15%

The U.S. Federal Government is getting more revenue, which is helping it cut the budget deficit by over 15%.

The Federal deficit fell by $68 billion to $368 billion according to the Congressional Budget Office’s May report. That decline was helped mostly by a rise in revenues, which grew by 9% on a year-over-year basis, which outpaced growth in spending, which rose only 4% on a year-over-year basis. In total, the U.S. government received $2.1 trillion in the first eight months of the fiscal year 2015.

Income Taxes Strengthen

The U.S. Federal Government is getting more revenue, which is helping it cut the budget deficit by over 15%.

The Federal deficit fell by $68 billion to $368 billion according to the Congressional Budget Office’s May report. That decline was helped mostly by a rise in revenues, which grew by 9% on a year-over-year basis, which outpaced growth in spending, which rose only 4% on a year-over-year basis. In total, the U.S. government received $2.1 trillion in the first eight months of the fiscal year 2015.

Income Taxes Strengthen

In a sign of greater aggregate incomes, both individual income taxes and corporate income taxes saw large gains in the first eight months of the fiscal year.

Individuals paid 9% more income tax, which rose by $138 billion year-to-date, which the CBO believes indicates a rise in incomes as well as larger total employment. “Most of that increase probably stemmed from growth in wages and salaries (as measured in the national income and product accounts), which also rose by 5 percent from October through April,” said the CBO in a statement. At the same time, unemployment insurance taxes fell 4%.

Additionally, corporations spent 11% more on taxes, which the CBO says is a result of “higher taxable profits for 2014.” That insight contradicts a broader trend in publicly traded companies, where incomes have seen weak growth due to pressure from the energy sector, which has seen commodity prices fall, and from companies dependent on exports, as the strong dollar has caused a drag on dollar-denominated earnings.

Small Spending Increase

At the same time, government spending has seen little gains, with $2.47 trillion spent in total for the fiscal year so far. The CBO notes that increase “would have been larger—$133 billion (or 6 percent)—if not for the shift of certain payments from June 2014 to May 2014 because June 1 fell on a weekend.” Adjusting for this anomaly, the CBO says Medicaid spending increased by 20%, Medicare spending rose by 8%, and Social Security benefits saw a 4% increase. Meanwhile, payments from government-sponsored Fannie Mae and Freddie Mac fell by $46 billion as those companies’ activity in the markets fell, also causing outlays to rise.

Several sectors of the government budget saw spending declines, with the largest fall in net interest spending. In total, the U.S. government paid 9% less on interest payments in the period due to low inflation. Military spending fell 3%, while spending on the Federal Communications Commission and on unemployment benefits also fell.

On a relative basis, spending on unemployment fell the most, with a 27% decline on a year-over-year basis, which the CBO says indicates stronger employment rates. The CBO noted, “Benefits for the regular unemployment compensation program have been lower because fewer people are unemployed.”