WASHINGTON - The U.S. posted its smallest March budget deficit in 14 years as an improving labor market boosted tax receipts and federal government spending declined from a year earlier.
Spending exceeded revenue by $36.9 billion last month, compared with a $106.5 billion deficit in March 2013, the Treasury Department said Thursday in Washington. The median estimate in a Bloomberg survey of 18 economists called for a $36 billion shortfall.
“The economy is growing, so the tax receipts are up,” said Paul Edelstein, director of U.S. financial economics at IHS Global Insight in Lexington, Mass. “We’ve also cut back significantly on expenditures.”
A report last week showed that the number of employees on company payrolls surpassed the pre-recession peak for the first time in March, fueling hopes that the job market can help propel tax receipts into the Treasury.
Corporate tax receipts also are expecting a boost from the growth. Those receipts rose 7 percent in March to $36 billion.
Strength in the U.S. this year and next will helpthe world economy withstand weaker recoveries in emerging markets, a Tuesday report from the International Monetary Fund showed. Thursday’s Treasury report showed revenue increased 16 percent to $215.8 billion last month from $186 billion in March 2013. Spending was $252.7 billion, down 13.6 percent from $292.5 billion a year ago.
Because March 1 fell on a weekend, certain payments usually made in March were shifted to the month earlier. Without those shifts in payments, and excluding some prepayments that lowered collections in 2013, the deficit would have been $77 billion last month. If not for the payment shifts, spending would have dipped 2 percent in March.
The government’s 2014 budget year began Oct. 1 and is now half over. In the first six months of the budget year, the deficit was $413 billion, down from $600 billion in the first half of last year.
President Barack Obama projected last month that the deficit for the full year will drop to $649 billion, down from $680 billion in the previous year. The nonpartisan Congressional Budget Office is forecasting an even bigger improvement, projecting that this year’s deficit will decline to $514 billion and fall further to $478 billion next year.
That would be less than half the $1 trillion-plus deficits that existed for the first four years of Obama’s presidency. The deficit rose to a record level of $1.4 trillion in 2009. That improvement, partially attributed to federal government spending cuts known as sequestration, helped the U.S. win praise from the IMF.
That was a change from the tone at the last IMF meeting in October, when there was a risk of U.S. default tied to a federal government shutdown and a fight over increasing the federal-debt limit. Lawmakers reached a fiscal agreement Oct. 16, less than 24 hours from when the Treasury said it would exhaust borrowing authority. A subsequent budget agreement “substantially reduced near-term uncertainties,” the IMF said in a Fiscal Monitor report released Wednesday. “But a comprehensive and medium-term plan to place the debt and public finances on a sustainable basisis still lacking.”
The Congressional Budget Office sees deficits starting to rise again after next year, driven by greater spending on Social Security and Medicareas baby boomers retire.
Information for this article was contributed by Kasia Klimasinska of Bloomberg News and by Christopher S. Rugaber of The Associated Press.
Front Section, Pages 1 on 04/11/2014