The U.S. federal government ran a budget surplus of $22.2B in June that was in line with Consensus estimates. The monthly surplus kept the deficit during the first nine months of FY 2005 on a pace that was nearly one quarter below the prior fiscal year's first nine months.

Net receipt growth at 14.6% for the first nine months of FY05 continued to reflect the improved economy. Individual income taxes (44% of total receipts) rose 16.3% and corporate income taxes (10% of total receipts) were strong, up 41.0%. The improved job market raised employment taxes (36% of total receipts) by 8.0%, up from 1.2% growth last year, and excise taxes grew 4.0%.

Federal outlay growth inched up to 7.3% during the first nine months of FY05 as defense spending (19% of total outlays) grew 7.1% and Medicare spending (12% of total outlays) was strong at 9.6%. Growth in spending on social security (21% of total outlays) crept up to 5.5% and spending on health programs (10% of the total) increased 4.1%. Spending on education & training (4% of the total) increased 16.0% and interest expense (8% of the total) grew 13.1% with higher interest rates versus declines last year.

White House projections of future budget deficits were updated today by the Office of Management & Budget. The estimated deficit for FY2005 was lowered to $333B (2.7% of GDP) from the February estimate of $427B (3.5% of GDP) and the estimated deficit next year was lowered to $341B (2.6% of GDP) from $390B (3.0% of GDP).

A higher estimated level of Federal tax receipts, notwithstanding reduced tax rates, offset a higher level of War funding. The economic assumptions (GDP, CPI, & the Unemployment Rate) were little changed from February.

The Mid-Session Review of the 2006 Budget of the US Government by the Office of Management and Budget is available here.