US Budget Deficit at $107.1 Billion for August

The US Federal budget deficit for the month of August is reportedly at $107.1 billion, against the forecasted figure of around $105 billion and an August 2015 deficit of 64.4 billion. In terms of seasonal adjustments, the deficit grew by about $11 billion as is moved from last year’s $107 billion to $118 billion with as an overall trend of sustained deterioration still runs through the current year.

The Treasury Department today stated that “the deficit, with just one month to go in the budget year, totals $620.8 billion, up 17.1 percent from the same period a year ago. The August deficit was slightly lower than the $112.8 billion imbalance in July”.

For the first 11 months of fiscal 2015 till date, there was a swift growth of more than 17% as it climbed from last year’s $530 billion in the previous year to the current $621 billion. There should however be a high surplus for the final month of the year, this will cause the deficit for the entire year to rise swiftly. The deficit recorded in the 12 months to August amounted to 2.9% of the GDP from 2.6% in July.

Total revenue has also grown by almost 1% with spending also climbing 3.5% higher as a result of the significant rise in entitlement programmes. Income tax receipts last month posted a recovery as it edged 0.5% higher over the year, however overall revenue growth has been disappointing and corporate taxes are still falling lower. Overall, demand for Treasuries remained strong during the first half of 2016, with strong overseas demand for US bonds. There has, however, been a significant decline in overseas demand over the past 2-3 months, especially with the gradual increase in Libor costs making buying much less attractive.

The Congressional Budget Office last month revised its estimate for the 2016 deficit up sharply to show an imbalance of $590 billion. That was up from a March projection of $534 billion. The budget year ends on Sept. 30 and September is expected to show a surplus. Through the first 11 months of this budget year, revenues total $2.91 trillion, a modest 0.9 percent higher than the same period in 2015, while outlays total $3.53 trillion, up 3.4 percent from the same period in 2015.

The CBO sees steadily rising deficits over the next decade, reflecting higher Social Security and Medicare payments as baby boomers retire. But because CBO in its latest report projected that economic growth will be slower, it expects that interest rates over the next decade will remain lower as well. That means the government will have to spend less to finance the debt.

CBO projected that deficits over the next decade will be $712 billion lower than it projected in March. That would still add up to $8.57 trillion being added to the national debt over that period. The debt at present stands at $19.4 trillion.