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Economy in Brief

U.S. Budget Deficit Continued To Shrink
by Tom Moeller June 13, 2005

The U.S. federal government's budget deficit during the first eight months of FY 2005 continued to shrink versus FY 2004. Red ink of $272.2B was nearly one quarter lower than the $346.3B during the prior fiscal year and was the smallest deficit for the first eight months in two years.

Growth in net receipts continued strong. For the first eight months of FY05, growth of 15.5% y/y was powered by the economy's improvement which caused individual taxes (44% of total receipts) to surge 20.5% and corporate income taxes (10% of total receipts) to nearly double. The improved job market raised employment taxes (36% of total receipts) by 5.9%, up from 1.6% growth last year.

Federal outlay growth was stable at 7.1% versus the first eight months of 2005. Growth in Medicare spending (12% of total outlays) was strong at 9.1% and defense spending (19% of total outlays) grew 6.9%. Spending on social security (21% of total outlays) grew a steady 5.2% and spending on health programs (10% of the total) increased 4.4%. Spending on education & training (4% of the total) increased 18.7% and interest expense (8% of the total) grew 11.1% with higher interest rates versus declines last year.

Blowing the Cover on Stealth Tax from the American Enterprise Institute can be found here.

US Government Finance May April FY '05 - YTD FY2004 FY2003 FY2002
Budget Balance $-35.3B $57.7B $-272.2B $-412.1B $-377.6B $-157.8B
  Net Revenues $152.7B $277.6B 15.5% 5.5% -3.8% -6.9%
  Net Outlays $188.0B $219.9B 7.1% 6.1% 7.4% 7.9%
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