The federal budget deficit for the first half of this year was $413 billion, a decline of $187 billion compared to the same time last year, according to the Treasury Department.
The deficit for the month of March stood at $37 billion, down from $107 billion last year. That figure was the smallest deficit for the month of March since 2000. The deficit is expected to be a about 4.1 percent of gross domestic product this year, a drop from almost 10 percent in 2009. Those falling numbers continue a trend, as the deficit fell faster in 2013 than in any year since the end of World War II, dropping from $1.1 trillion in 2012 to $680 billion.
This year’s shrinking figure is due to both higher tax revenue and falling spending. Treasury collected $216 billion in taxes last month, a 16 percent increase from last year. Some of the higher tax revenue is thanks to tax increases at the beginning of the year, but a good amount is simply because the economy is doing better. Corporate tax collections increased by $17 billion, as did Social Security receipts.
Spending also fell by 14 percent. While some of that is due to lower military spending as operations in Afghanistan wind down as well as payments to the Treasury from Fannie Mae and Freddie Mac, it is also thanks to more austere choices. Spending on unemployment benefits is down, likely in part due to fewer people needing them as the unemployment rate slowly improves, but also as the long-term program stays shuttered while Republicans stand against extending it.
And last year’s declining deficit was also thanks to sharply lower government spending, which barely grew, and outlays as a proportion of GDP fell from 22 percent to 20.8 percent. Investment in long-term priorities like infrastructure, education, and scientific research is lower than any level since World War II. Discretionary spending is also at a low. Sequestration’s automatic spending cuts took a severe toll last year.
Yet there’s plenty of evidence that the economy would be even healthier without such deep cuts. There would have been 2.4 million additional jobs since 2010. The deficit would look even better had sequestration not taken place.