U.S. deficit shrinks at rapid pace

WASHINGTON — The capital may be enduring a brief spell of record-low temperatures this week, but the federal deficit continues to melt away.

According to the latest figures from the nonpartisan Congressional Budget Office, the red ink for the first quarter of fiscal 2014, which began Oct. 1, dropped by almost 40 percent compared with the same period a year earlier.

The deficit has gone down so much that the federal government actually ran a surplus for December – a one-time occurrence that resulted from some special circumstances but still an indicator of the rapidly improving state of the government’s finances.

Indeed, many prominent economists, including outgoing Federal Reserve Chairman Ben Bernanke, have suggested that the deficit is now coming down too fast.

At a news conference last month, Bernanke said fiscal policy had been too tight recently – central bank jargon for suggesting that with the economy still operating below capacity, a somewhat higher deficit over the next year would help, not hurt.

The magnitude of the change is striking. For October to December 2012, the government ran a deficit of $293 billion. In the last three months of 2013, the deficit had shrunk by $111 billion, to $182 billion.

An improving economy and tax increases that took effect in 2013 pushed revenues higher and accounted for about 40 percent of the improvement; spending reductions accounted for the rest. A chunk of the improvement involved one-time events, but most of the change represents a real, long-term shift in the government’s finances.

Assuming the economy continues to grow at its current rate or perhaps a bit faster, as most economists forecast, the deficit will continue to decline through the rest of the current fiscal year.

For now, that means the national debt – the money the government has to borrow to cover its red ink – will grow more slowly than the overall economy, making the debt burden easier to handle.

Most forecasts say the deficit will begin to rise again sometime during the 2020s as the baby-boom generation moves into retirement.

How soon that will happen, and how much the deficit will worsen, will depend heavily on the cost of healthcare. Medicare, the government’s health program for senior citizens, serves as the primary driver in most projections of the government’s long-run financial problems.

More in Local News

Mukilteo crabber missing; his boat was found at Hat Island

Frank Urbick set out Thursday morning but did not return.

Police looking for leads in case of missing Snohomish man

Henry John Groeneveld, 63, was last seen on Monday, when he said something about going to “the river.”

Separate Everett fires send man to hospital, damage boat

The man was hospitalized for smoke inhalation from the early morning fire.

Police: He made an appointment, then tried to rob the bank

A lawyer is accused of donning a fake beard and telling a teller that a gunman was outside.

Drive-by shooting reported in Marysville neighborhood

Police said there was no evidence to indicate it was targeted at a specific person or property.

Celebrating the origins of Christmas

LDS church holds annual nativity festival featuring more than 600 sets.

Trooper’s car struck when he was arresting man for DUI

She drove away but was arrested for investigation of driving under the influence and hit-and-run.

Inslee’s budget solves school funding with help from carbon

His budget would use reserves to boost education, then replenish them with a carbon tax or fee.

Man, 29, injured by shots fired at Everett thrift store

The gunfire followed an argument in the parking lot of Value Village on Evergreen Way.

Most Read