April Surplus Was Great, but What About the Rest of the Year?

The US Treasury department reported some very good news for the month of April. Specifically, they booked a $114 billion surplus for the month, the best May the Treasury Department has had since 2008. (Source)

This sounds great, right? It is, but April is also the month in which there is an abnormally large influx of cash – because April is the month Americans file their tax returns.

To put things in perspective, despite this one banner month the Congressional Budget Office (CBO) estimates that the US government has racked up an astounding $301 billion in debt over the first seven months of 2014. While this is an alarming figure, it’s still $187 billion lower than it was at the same time in 2013.

This is largely due to an increase in individual income and payroll taxes (7%); a 15% increase in corporate income taxes; and an increase of 37% in funds the Federal Reserve paid out to the US Treasury.

Spending was also down from 2013 by 2%. Some of the areas where spending decreased included unemployment benefits and homeland security (both went down 31%); agriculture (down 12%) and defense spending, which went down 5%. Also helping were bigger payments to the Treasury from Fannie Mae and Freddie Mac.

On the flip side, Medicaid expenditures were up 9%, while Social Security spending went up by 5% from 2013.

Overall, the Congressional Budget Office projected that the 2014 shortage would go down to 2.8% of the gross domestic product ($492 billion). If this holds true, it’s still a very large deficit – but it’s still well short of the $680 billion shortfall recorded for the 2013 fiscal year. This would be the fifth consecutive year that the annual deficit would fall as a share of the economy.

This positive momentum, while good, is not expected to last much beyond 2015 unless some laws are changed. According to the CBO, the combination of the aging population, rising healthcare costs, an expansion of federal subsidies for health insurance and growing interest on federal debt are major reasons they expect the shortfalls to rise substantially over time.