The US budget deficit fell by nearly a third to $483bn in fiscal 2014, the lowest level since 2008, as a quickening economic recovery boosted tax collections and spending grew only modestly, the Treasury Department said.
The deficit, down from $680bn last year, was the lowest since a $459bn budget gap in fiscal 2008, which was followed by four straight years of $1tn-plus deficits in the wake of the financial crisis.
US Treasury Secretary Jack Lew and White House Budget Director Shaun Donovan hailed the data yesterday as a “return to fiscal normalcy” as the 2014 deficit fell to 2.8% of gross domestic product. That was the lowest since 2007 and a smaller share of the economy than the annual average for the last 40 years.
Lew told a news conference the US was now in a period of fiscal sustainability that is providing a strong foundation for growth.
“What I don’t think we have is an emergency right now,” Lew said. “The challenge we have is to sustain the economic engine so that we’re seeing the growth now and over these next 10 years.”
The improving fiscal picture has sapped the urgency for a major budget deal between Congress and the White House aimed at slashing deficits by trillions of dollars over the next decade and starting to reduce the $17.8tn federal debt.
Lew insisted he has not given up on further deficit reduction, but said budget savings could not come at the expense of economic growth.
Both Lew and Donovan said growth and revenues in 2014 were helped by the easing of across-the-board budget cuts that went into effect last year, along with the lack of a fiscal crisis such as last year’s federal government shutdown.
Donovan told Reuters on Tuesday he wanted to further reduce those budget cuts next year and would be willing to consider some savings to mandatory spending programs to reach a deal with Republicans, who control the US House of Representatives.
Fiscal 2014 revenues grew 9% to $3.02tn, boosted by a jump in individual and corporate tax receipts and a 31% rise in Federal Reserve earnings, mostly from the central bank’s massive bond portfolio.
Outlays grew just 1% to $3.50tn. For September, the Treasury recorded a budget surplus of $106bn, up from a year-ago surplus of $75bn. Analysts polled by Reuters had expected a $80.9bn surplus for the final month of fiscal 2014.
Receipts last month grew 17% to $352bn while outlays were up 9% to $246bn.
The Congressional Budget Office has forecast a $469bn deficit for fiscal 2015, which started on Oct. 1. It expects deficits to rise again later this decade as costs associated with an ageing population mount.