Ahead of the Bell: US Budget Deficit
WASHINGTON (AP) — The U.S. annual budget deficit will likely top $1 trillion for a fifth straight year — even though government revenue probably surged last month as people paid taxes early to avoid higher rates in 2013.
Congressional Budget Office estimate the deficit totaled just $1 billion in December. That would be much lower than the previous two months, when the deficit grew by a combined $292 billion.
The Treasury Department will release December's budget deficit at 2 p.m. EST Friday.
The 2013 budget year began on Oct. 1. The size of the annual deficit will hinge, in part, on how Congress and the White House resolve a debate over raising the nation's borrowing limit by March. Republicans are demanding deep spending cuts in return for any increase.
The deficit, in simplest terms, is the amount of money the government has to borrow when revenues fall short of expenses. The government ran a $1.1 trillion annual budget deficit in the fiscal year that ended last September. That was lower than the previous year but still painfully high by historical standards.
President Barack Obama's presidency has coincided with four straight $1 trillion-plus deficits.
The monthly deficit figures are volatile and can be affected by calendar quirks that shift payments from one month to another.
A jump in tax revenue last month likely kept the deficit from growing sharply. The CBO estimates tax revenue rose 12 percent to $270 billion. Much of the gain likely occurred because some companies accelerated bonuses or other payments into 2012 to avoid the possibility of higher taxes in 2013.
Spending likely fell in December to $270 billion, the CBO says, down from $326 billion in December 2011. That's partly because the government provided $14 billion to the mortgage giants Fannie Mae and Freddie Mac in December 2011, after they had lost hundreds of billions from defaulted mortgages in the housing bust. The government didn't make any such payments last month.
The White House and Congress agreed last week to raise taxes on the wealthiest 2 percent of Americans this year as part of a deal to avoid the fiscal cliff. That deal also allowed a Social Security tax cut to expire. But the groups also postponed for two months the implementation of spending cuts that were included in the cliff.
Those cuts are now scheduled to kick in at around the same time the borrowing limit will be reached. And funding authority for most government programs will expire at the end of March.
The government has run annual deficits for more than a decade. It reached a record $1.41 trillion in budget year 2009, which began four months before Obama was inaugurated. That deficit was largely because of the worst recession since the Great Depression. Tax revenue plummeted, while the government spent more on stimulus programs.
The budget gaps in 2010 and 2011 were slightly lower than the 2009 deficit as a gradually strengthening economy generated more tax revenue.
President George W. Bush also ran annual deficits through most of his two terms in office after he won approval for broad tax cuts and launched wars in Afghanistan and Iraq.
The last time the government ran an annual surplus was in 2001.