WASHINGTON – The U.S. government ran a $42.94 billion budget deficit in July, with an early-fall deadline looming for Congress to raise the federal borrowing limit and fund government operations for the coming fiscal year.
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Federal-government outlays last month totaled $274.98 billion, exceeding its $232.04 billion in total receipts, the Treasury Department said Thursday. The nonpartisan Congressional Budget Office had predicted a $45 billion deficit for July.
The monthly deficit was down from a $112.82 billion budget gap in July 2016. The Treasury said calendar quirks accounted for most of the decline, especially the fact that July 1 fell on a Saturday this year, which led to some government-benefit payments being shifted earlier into June.
During the first 10 months of the fiscal year, which will end Sept. 30, the budget deficit was $566.02 billion, about 11% larger than the same period last year. Spending increased about 4% while revenues rose a more modest 2%.
The CBO in June predicted the federal budget deficit would be 3.6% of gross domestic product in the current fiscal year, up from 3.2% of GDP last year.
The White House last month warned it was projecting larger-than-previously-expected budget deficits in both the current fiscal year and the budget year that begins Oct. 1, largely due to sluggish tax collections.
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It isn't certain why tax payments have slowed in some categories, but the figures suggest "that we may be seeing some income shifting as taxpayers defer income in hopes of lower rates," Wrightson ICAP chief economist Lou Crandall said.
Taxpayers shifting income from 2016 into 2017, he added, "would be consistent with hopes last year that a retroactive tax cut applicable to 2017 would be enacted. It is possible that we will see comparable shifts out of 2017 into 2018 if there is still reason to think that tax cuts are on the horizon."
The budget deficit is expected to widen over time as outlays, including spending on Social Security and Medicare, outpace revenues. The CBO projected the deficit would be 5.2% of GDP in the 2027 fiscal year.
More immediately, the U.S. government is set to run out of money to pay all its bills unless the Republican-controlled Congress votes soon to raise the statutory debt limit of nearly $20 trillion, and federal agencies could shut down if new funding isn't authorized by the end of September.
The CBO said in late June it expected the Treasury to run out of cash in early to mid-October, and Treasury Secretary Steven Mnuchin in late July urged lawmakers to raise the debt ceiling by Sept. 29.
"The government should honor all of its obligations and the debt limit should be raised," Mr. Mnuchin told lawmakers last month.
Recent years have seen bitter fights over raising the debt ceiling, including a 2011 standoff that was followed by S&P Global Ratings downgrading U.S. government debt from the triple-A rating it had held for seven decades.
Economists surveyed by The Wall Street Journal this month saw on average a 22% chance of a government shutdown, a 17% chance the Treasury would be forced to skip making some payments and a 6% chance the U.S. would actually default on debt payments.
Write to Ben Leubsdorf at firstname.lastname@example.org
(END) Dow Jones Newswires
August 10, 2017 15:43 ET (19:43 GMT)