US budget deficit for 2015 running below levels set last year with big drop likely in August

Economic IndicatorsAssociated Press

The Treasury Department releases federal budget data for August at 2 p.m. Eastern on Friday.

LOWER DEFICIT: The Congressional Budget Office expects the August deficit to drop to $62 billion, $66 billion below the August 2014 deficit, although most of that improvement will reflect calendar quirks. If discrepancies were removed, the August deficit would have been $4 billion less than last year.

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ANNUAL FIGURE IMPROVED: Through the first 11 months of the 2015 budget year, the CBO expects the deficit will total $528 billion, an improvement of $61 billion over the same period in 2014.

CBO is forecasting a surplus in September, bringing the 12-month deficit for 2015 down to $426 billion, down from a deficit last year of $483.4 billion and the lowest imbalance in seven years.

The 2014 deficit was an improvement from a deficit of $679.5 billion in 2013. For the four years before 2013, the deficit ballooned to annual deficits above $1 trillion, reflecting a deep recession that cut into tax revenues and expanded government spending on such programs as unemployment benefits and a stimulus package aimed at jump-starting growth.

The huge deficits pushed the national debt up to a current level of $18.1 trillion, $25 million below the current debt limit set by Congress. Since March, Treasury Secretary Jacob Lew has been employing emergency measures to keep the government from going over the debt limit.

In a letter to Congress on Thursday, Lew estimated that the emergency measures he is now employing will last until late October or possibly into early November. He urged Congress to allow an increase the debt limit to avoid the brinksmanship that occurred in August 2011 when a standoff over raising the debt limit prompted the first-ever downgrade of the nation's credit rating by Standard & Poor's.

Republicans in the House Ways and Means Committee passed legislation this week which supporters said would take the threat of an unprecedented default by the United States on its debt obligations off the table. The bill would allow the government to keep borrowing to pay investors in Treasury bonds as well as Social Security recipients. Federal workers and retirees, soldiers and veterans would not get paid until the debt limit was raised.

All Democrats on the committee voted against the measure and the Obama administration has rejected a piecemeal approach to meeting the government's obligations. The bill now goes to the full House.

In addition to facing a fall deadline for raising the debt limit, Congress also faces an Oct. 1 deadline for approving a budget for the start of a new budget year. Without a new budget, portions of the government would be forced to shut down until the spending impasse is resolved. The last partial government shutdown, which took place in October 2013, lasted for 16 days.