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Economy in Brief

U.S. Budget Deficit Narrowed Sharply
by Tom Moeller October 15, 2007

For Fiscal Year 2007, the U.S. government's budget deficit narrowed sharply to 162.8B versus a deficit during FY 2006 of 248.2B. For the third consecutive year, the deficit's narrowing occurred as revenue growth surged ahead of outlays.

As a percentage of GDP the budget deficit last year totaled roughly 1.5%, down sharply from 3.6% in 2004. Receipts rose sharply to 18.8% of GDP, about equal to the long term average.

For forecasts of the deficit in coming fiscal years, the administration's latest Midsession Review of the Budget can be found here.

The Government's financial data is available in Haver's USECON database.

Net revenues last fiscal year grew 6.7% y/y, quite a slowdown from 11.8% growth during FY06. Growth in individual income tax receipts (44% of total receipts), however, held firm at 11.5%. Withheld taxes grew 9.4% during FY07 but non-withheld taxes rose a much stronger 13.0% due to estimated capital gains. Corporate income taxes (13% of total receipts) lagged and rose just 4.6% while a slowdown in employment growth raised employment contributions by just 4.3% versus a 5.7% gain during FY06 and 8.5% during FY05.

U.S. net outlays grew just 2.8% during last fiscal year, a slowdown from 7.4% during FY06. Defense spending (19% of total outlays) picked up a bit and rose 6.1%. Medicare expenditures (12% of outlays) again surged by 13.8% after a 10.5% jump during FY06. Social security spending (21% of outlays) picked up slightly to 6.9% but growth in the government's interest expense declined to rose by 5.0% y/y.

US Government Finance   September July Y/Y FY 2007 FY 2006 FY 2005  
Budget Balance $111.6B $-117.0B $56.2B
-$162.8B -$248.2B -$318.7B
Net Revenues $285.4B $166.5B 0.7% 6.7% 11.8% 14.1%
Net Outlays $173.8B $283.5B -23.5% 2.8% 7.4% 7.6%
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