WASHINGTON – The federal deficit is running sharply lower through the first nine months of this budget year as the growth in revenues continues to outpace spending growth.
The Treasury Department reported Thursday that the government ran a surplus of $27.5 billion in June, up sharply from the $20.5 billion surplus recorded in June 2006. The government normally runs a surplus in June, a month when individual taxpayers and corporations make quarterly payments to the Internal Revenue Service.
With the June surplus, the total deficit through the first nine months of the budget year, which began Oct. 1, is $121 billion, down 41.4 percent from the same period a year ago, when the deficit totaled $206.5 billion.
The Bush administration this week announced a new deficit projection for this year of $205 billion, down significantly from the $244 billion deficit it forecast in February, reflecting the fact that revenue growth has continued to come in at higher-than-expected levels.
That imbalance would be the lowest in five years and an improvement from the $248.2 billion deficit recorded in the 2006 budget year that ended last Sept. 30.
President Bush hailed the new forecast at a White House ceremony on Wednesday, saying it showed that his economic policies of tax cuts and spending restraint were working.
However, Democrats challenged that view, saying that Bush had inherited a federal budget in surplus when he took office only to pursue policies which they said contributed to soaring deficits including a record in dollar terms of $413 billion in 2004.
When Bush took office in 2001, both the White House and the Congressional Budget Office projected cumulative surpluses of $5.6 trillion over the next decade. But the 2001 recession, terrorist attacks that year and the spending needed to fight a global war on terrorism erased those surpluses.
The administration credits Bush's 2001 and 2003 tax cuts with fueling the current surge in revenue, but Democrats take issue with that claim, saying the stimulative effect of the tax cuts has now waned and the economy is actually being slowed by the drag from the increased borrowing needed to finance the deficits.
For June, the surplus of $27.5 billion ranks as the eighth highest surplus for that month. The largest surplus for June was $56 billion recorded in 2000 when President Bill Clinton was in office. At that time, revenues were being swelled by gains from a booming stock market that peaked earlier that year before going into a nosedive as the speculative frenzy over Internet companies faded.
Over the past nine months, the government spent a record $2.066 trillion, an increase of 2.5 percent over the $2.016 spent during the same period in 2006.
Revenue collections totaled $1.945 trillion during this period, an increase of 7.5 percent from the $1.810 trillion collected in the same period last year.