The U.S. budget deficit so far this fiscal year is 24 percent narrower than it was a year ago as a stronger economy helps revenue advance almost seven times faster than spending, a government report showed.
The $460.5 billion shortfall from October through July compared with a $607.4 billion gap in the same period a year earlier, the Treasury Department said today in Washington. Last month the government posted a $94.6 billion deficit, $3 billion less than the imbalance in July 2013, figures also showed.
“The economy is doing better and incomes are up and profits are up,” Paul Edelstein, director of U.S. financial economics at IHS Global Insight Inc. in Lexington, Massachusetts, said before the report. “The fact that jobs are up is generating income and personal taxes and payroll taxes for the government.”
The economy added more than 200,000 jobs for a sixth straight month in July, showing progress toward sustaining faster growth entering the sixth year of expansion. The 2014 gap is projected at about $500 billion, the Congressional Budget Office said on Aug. 7. That compares with $1.4 trillion in 2009 when President Barack Obama took office.
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Edelstein estimates that this year’s gap will decline to 3 percent of the economy, versus 9.8 percent in 2009.
The median estimate in a Bloomberg survey of 27 economists projected a $96 billion July deficit. Estimates ranged from $81.6 billion to $100 billion. The CBO also predicted spending would exceed revenue by $96 billion.
Revenue over the first 10 months of the fiscal year that began Oct. 1 rose 8 percent compared with a year earlier, while spending gained 1.2 percent, today’s report showed.
Outlays for Medicaid increased by more than a third, or $8 billion, as most of the provisions of the Affordable Care Act, including those expanding eligibility for low-income people, had not yet taken effect in July 2013, the CBO said in the Aug. 7 report.
Much of the revenue gain occurred because the Federal Reserve paid the Treasury about $4 billion more in July this year than it did a year ago, mostly because of the larger size of the central bank’s portfolio and the higher yield on it, the CBO also said.
Today’s report showed the Fed deposited earnings of $10.3 billion in July, the second-highest monthly total on record, and bringing the fiscal year-to-date tally to $84.7 billion.