WASHINGTON (AP) -- The government is on track to record a significant drop in the budget deficit this year with stronger growth helping to boost tax revenues.
The Congressional Budget Office estimates that the deficit for July will total $96 billion and that will bring the total for the first 10 months of the budget year to $606 billion, an improvement of $368 billion from the same period in 2011. The Treasury Department will release the July budget report at 2 p.m. EDT Monday.
Through June, the deficit totaled $509.8 billion. That was an improvement of 43.6 percent from the same period a year ago and kept the country on track to post the first deficit below $1 trillion in five years.
The CBO is forecasting that the annual deficit will be $670 billion when the budget year ends on Sept. 30. That is well below last year's deficit of $1.09 trillion. While it would still be the fifth largest deficit in U.S. history, it would be the lowest since President Barack Obama took office in 2009.
The Obama administration is also estimating a lower annual deficit this year of $759 billion, although the number is higher that the CBO forecast.
Steady economic growth and higher tax rates have boosted the government's tax revenue this year. At the same time, government spending has fallen, reflecting such factors as the winding down of the Iraq and Afghanistan wars and lower spending on such programs as unemployment benefits because of an improving economy.
The government's budget outlook also looks better because of large dividend payments it is receiving from Fannie Mae and Freddie Mac to cover the billions of dollars the government spent propping up the two mortgage giants at the height of the financial crisis.
Fannie said last week that it would pay a dividend of $10.2 billion to the U.S. Treasury next month. It made no request for additional federal aid.
The federal deficit represents the annual difference between the government's spending and the tax revenues it takes in. Each deficit contributes to the national debt, currently at $16.7 trillion.
When Congress returns in September from its August recess, it will face the need to boost the current borrowing limit and approve a budget for the new budget year which begins Oct. 1.
However, Republicans and Democrats still remain at odds over that legislation. Republicans want the president to accept deeper cuts in domestic government programs and in big benefit programs such as Medicare and Social Security. President Barack Obama has argued that Republicans must be willing to accept higher taxes on the wealthy.
Conservative House Republicans have indicated a willingness to force a partial government shutdown over the issue of "defunding Obamacare," the universal health care plan approved in 2010.
A possible compromise would be to approve a stopgap budget to keep the government operating after Oct. 1 while both sides search for a more permanent solution.
Obama has vowed not to negotiate with Congress over raising the borrowing limit as he had in 2011, but some Republicans want to test the president's resolve, even if it rattles financial markets. The fear is a doomsday scenario in which the country defaults on its current debt, something that the U.S. has never done.
Source: http://news.yahoo.com/ahead-bell-us-budget-deficit-112118465.html
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