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Federal deficit falls to lowest level in 4 years

The federal deficit has improved significantly in the first three months of the new budget year, helped by surging tax revenue.
/ Source: The Associated Press

The federal deficit has improved significantly in the first three months of the new budget year, helped by surging tax revenue.

In its monthly budget report, the Treasury Department said Friday that the deficit from October through December totaled $80.4 billion, the smallest imbalance for the first three months of a budget year since 2002. The budget year starts Oct. 1.

Tax collections are running 8.2 percent higher than a year ago, while government spending is up by just 0.7 percent. Last year's spending totals were boosted by significant payments to help the victims of the Gulf Coast hurricanes.

The Treasury said the government actually ran a surplus of $44.5 billion for December, the largest ever for that month. The gain reflected a big jump in quarterly corporate tax payments.

Rise for the year still predicted
The $80.4 billion deficit for the first three months of the current budget year was down 32.6 percent from the imbalance for the same period a year ago of $119.4 billion.

For the year, analysts are still forecasting that the deficit will worsen from last year's total of $248.2 billion, which had been the lowest in four years.

The Congressional Budget Office is projecting that the deficit for the 2007 budget year will rise to $286 billion, an increase of 15.2 percent from last year, but that figure could be lowered when the CBO releases its revised estimate later this month.

The Bush administration is currently even more pessimistic, predicting a deficit for 2007 of $339.2 billion, but that figure will also be revised when the administration releases its new budget request to Congress on Feb. 5.

Bush, who took office while the country was running record surpluses, saw the deficit hit an all-time high in dollar terms of $413 billion in 2004.

President Bush said last week that his new budget will outline a path to eliminate the deficit completely by 2012, three years after he has left office.

"Today's monthly Treasury statement shows that tax receipts have reached a new record and that we are moving in the right direction toward a balanced budget by 2012," Phillip Swagel, Treasury's assistant secretary for economic policy, said in a statement. "The president's tax relief has helped make this possible by creating the conditions for sustained economic growth and job creation."

Democrats contend Bush's tax cuts have been a major factor in turning a projected 10-year surplus of $5.6 trillion into sizable deficits.

For the first three months of the current budget year, revenues total $573.5 billion, an increase of 8.2 percent from tax collections in the same period a year ago. Outlays totaled $653.9 billion, up 0.7 percent from a year ago.

The outlay figure was lowered by $13 billion in payments to the government from last summer's auction of a portion of the public airwaves. In the government's accounting process, that revenue is counted as money that reduces outlays rather than as a government receipt.