The latest figures from the US Treasury reveal that the monthly budget deficit in July nearly doubled in comparison with July 2002. This fact comes as no shock, but there are a couple of interesting details. Firstly the Administration's Office of Management and Budget has clearly given a projection which looks to be on the high side (in order to be able to come in later below projections?), and secondly budget movements seem to be much closer to what could be deduced from the legislative process. This latter point puts me in mind of John's argument about the Colorado budget process, and about the cycle bottoming out. It looks like, at least on the budget front he may have been right.
With the end of the fiscal year nearing, the U.S. government's budget gap crept into record territory in July and surpassed $300 billion, the Treasury Department said on Tuesday. The year-to-date deficit, with August and September still to go in the budget year, rose to $323.98 billion, Treasury said in its monthly budget statement. July's deficit, at $54.24 billion, was close to expectations and bigger than in July 2002, when it was $29.16 billion. The 1992 budget year holds the record for the largest annual shortfall, at $290 billion. The 2003 is gap is expected to easily surpass that by coming in above $400 billion. However, the July figure raises the odds that the 2003 deficit, while still a record, may come in sharply below administration projections issued as recently as July. Earlier this month, the Congressional Budget Office, the nonpartisan fiscal watchdog for Capitol Hill, said it expected the 2003 deficit to total about $401 billion, some $54 billion less than what the White House's Office of Management and Budget had projected only weeks before. The CBO said its estimate differed from the OMB's largely because it had penciled in about $18 billion less in military spending by the government in coming months. Lou Crandall, chief economist with Wrightson ICAP, said he thinks a deficit in the high $300 billion range is more likely than one above $400 billion. "OMB has clearly highballed it," he said. "It's so blatant and they won't take a great deal of credit for their coming in below the number." Still, Crandall said movements in the budget were more closely tracking legislative changes now, a positive sign after recent years when the budget worsened in part because of unexpected revenue drop-offs. "The cyclical balance is finally showing signs of stabilizing," he said. In July, U.S. receipts totaled $123.59 billion, down from $134.41 billion in July 2002, while spending rose to $177.83 billion, up from $163.57 billion. For the budget year so far, individual income taxes, the largest portion of federal revenues, have fallen 6.9 percent. At the same time, spending on defense has increased 15.9 percent and expenditures on Social Security have increased 4.1 percent.