Deficit for Fiscal 2007 Slides - Real Time Economics - WSJ

Deficit for Fiscal 2007 Slides

By topeditor

It’s all in the surge – the revenue surge, that is.

The Congressional Budget Office estimated Friday that the U.S. federal budget deficit for fiscal year 2007, which ended Sunday, was about $161 billion, or 1.2% of gross domestic product. That’s down from the $248 billion shortfall recorded in fiscal 2006, which translated into 1.9% of GDP. The Treasury Department will report the official tally later this month.

Much of the improvement in the nation’s fiscal outlook in the last year has come from continued rapid growth in federal revenue. CBO estimates that 18.8% of GDP in fiscal 2007, up from 18.4% 2006 and 16.3% in 2004 and 18.4% in 2000. Outlays came to an estimated 20% of GDP, about equal to the average over the previous five years.

While annual federal spending grew 2.8% in fiscal 2007 over fiscal 2006, year to year, revenue grew 6.7%. Individual income-tax receipts are estimated to be 11.3% higher than last year, and corporate income tax receipts are estimated to be 5% higher. Revenue growth has cooled substantially from the 11.8% fiscal year-to-year increase from 2005 to 2006. Spending growth also slowed.

Federal expenditures were up in fiscal 2006 due to Gulf-coast hurricane recovery efforts. They were driven down in fiscal 2007 by legislation enacted in 2006 cutting student loan subsidies and auctioning off a portion of the broadcast spectrum, proceeds from which are recorded as negative expenditures not as revenues.

“While somewhat lower than estimates issued at the beginning of the year, the 2007 deficit announced today by the Congressional Budget Office is no cause for celebration,” said House Budget Committee Chairman John Spratt (D., S.C.)

CBO has estimated that if the U.S. maintains a military presence in Iraq and if Congress doesn’t allow the tax cuts enacted in President George W. Bush’s first term to expire, then recent improvements in the deficit will be reversed, pushing it up to to roughly $300 billion by 2012. – By John Godfrey