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Economy in Brief

FY 2005 U.S. Budget Deficit Fell Due To Higher Receipts
by Tom Moeller October 17, 2005

The U.S. federal government ran a budget deficit of $318.6B during FY05, down nearly one quarter from the record deficit of $412.1B during the prior fiscal year.As a percentage of GDP, the deficit fell to 2.6% from 3.6% in FY04.

Net receipt growth of 14.6% during FY05 was capped by a 62.5% m/m spike in September. That gain was led by a 31.6% m/m rise in individual income taxes (44% of total receipts) which followed an 18.3% August increase. For the fiscal year, the 14.6% rise in individual income taxes was the strongest since 1981.

Corporate income taxes (10% of total receipts) also reflected the improved economy and spiked higher in September. The 47.0% y/y gain during FY05 was the strongest since 1952 and followed a 43.7% jump the prior year.

The improved job market raised employment taxes (36% of total receipts) 8.8% y/y during all of FY 2005, the strongest increase since 1988.

U.S. net outlays grew 7.9% during FY05. Federal outlays on defense (19% of total outlays) continued to surge but the 8.3% gain during FY05 actually was down from 12.8% growth during FY04 and from 15.9% during FY 03. Medicare spending (12% of total outlays) surged during the last two months and lifted FY05 growth to 10.9%, the strongest since 1992. Spending on social security (21% of total outlays) fell in September and the decline limited the increase during FY 05 to a still high 5.6%. Spending on health programs (10% of the total) rose 4.3% during FY05 while spending on education & training (4% of the total) surged 11.3%. interest expense (8% of the total) grew 14.9% with higher interest rates versus a modest rise last year and declines during the prior six fiscal years.

Do Budget Deficits Cause Inflation? from the Federal Reserve Bank of Philadelphia can be found here.

US Government Finance Sept Aug FY 2005 FY2004 FY2003 FY2002
Budget Balance $35.8B $-51.6B $-318.6B $-412.1B $-377.6B $-157.8B
  Net Revenues $252.6B $155.4B 14.6% 5.5% -3.8% -6.9%
  Net Outlays $216.8B $207.0B 7.9% 6.2% 7.4% 7.9%
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