The federal government has reported a rare surplus of USD 116.5 billion in June, the largest for a single month in five years. The gain kept the US on track for its lowest annual deficit in five years.
The June surplus was due in part to USD 66.3 billion in dividend payments from Fannie Mae and Freddie Mac. The mortgage giants were taken over by the government at the height of the 2008 financial crisis and are now repaying taxpayers for the support they received.
Through the first eight months of the budget year, the deficit has totaled USD 509.8 billion, according to the Treasury yesterday. That's nearly USD 400 billion lower than the same period last year.
The Congressional Budget Office forecasts the annual deficit will be USD 670 billion when the budget year ends on September 30. If correct, that would be well below last year's deficit of USD 1.09 trillion and the lowest since President Barack Obama took office. It would still be the fifth-largest deficit in US history.
The Obama administration also estimates a lower annual deficit, although it projects a slightly higher figure of USD 759 billion.
Steady economic growth and higher tax rates have boosted the government's tax revenue this year. At the same time, government spending has fallen. The dividend payments from Fannie and Freddie have also helped.
The government has collected USD 2.09 trillion in revenue so far this budget year, according to the June report. That's 14 per cent more than the first eight months of the previous budget year.
It has spent USD 2.6 trillion so far, or nearly 5 per cent less than the same stretch last year. The decline partly reflects the impact of the automatic spending cuts that began in March. Defense spending is down 7 per cent. A better job market has also helped lower spending for unemployment benefits almost 25 per cent.
Interest payments on debt are 4 per cent lower than the same period last year. The improvement reflects the break the government is getting from record-low interest rates. But those payments will rise in coming years as the Federal Reserve allows interest rates to return to more normal levels.
The federal deficit represents the annual difference between the government's spending and the tax revenues it takes in. Each deficit contributes to the national debt, currently USD 16.7 trillion.
The improving deficit picture has taken pressure off negotiations to raise the federal borrowing limit, although that battle is likely to resurface in the fall. Obama has remained at odds with Republicans over cutting benefit programs and imposing further tax increases.
