August budget deficit drops to $64.4 billion, on track for lowest annual deficit in 8 years

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WASHINGTON — The federal government ran up a much smaller budget deficit in August than a year ago, remaining on track to record the smallest annual deficit in eight years.

The Treasury Department said Friday that the deficit in August totaled $64.4 billion, a drop of 50 percent from the same month a year ago.

Much of that improvement reflected quirks in timing related to the calendar. Some $42 billion in August benefit payments were made in July because Aug. 1 fell on a Saturday.

Through the first 11 months of this budget year ending Sept. 30, the deficit is running 10 percent below last year's level. The Congressional Budget Office is forecasting that the deficit for the full year will drop to $426 billion, down 11.8 percent from the previous year as a stronger economy brings in more tax revenue.

The 2014 deficit was an improvement from a deficit of $679.5 billion in 2013. For the four years before 2013, the deficit ballooned to annual deficits above $1 trillion, reflecting a deep recession that cut into tax revenues and expanded government spending on such programs as unemployment benefits and a stimulus package aimed at jump-starting growth.

Through the first 11 months of this year, government revenues total $2.88 trillion, up 8 percent from the same period a year ago. Government spending over the past 11 months is up 4.8 percent to $3.41 trillion.

The CBO's forecast of a 2015 deficit of $426 billion would be the lowest imbalance since the deficit stood considerably lower at $160.7 billion in 2007.

The huge deficits over the past eight years pushed the national debt up to a current level of $18.1 trillion, $25 million below the current debt limit set by Congress. Since March, Treasury Secretary Jacob Lew has been employing emergency measures to keep the government from going over the debt limit.

In a letter to Congress on Thursday, Lew estimated that the emergency measures he is now employing will last until late October or possibly into early November. He urged Congress to move to increase the debt limit to avoid the brinksmanship that occurred in August 2011 when a standoff over raising the debt limit prompted the first-ever downgrade of the nation's credit rating by Standard & Poor's.

Republicans in the House Ways and Means Committee passed legislation this week which supporters said would take the threat of an unprecedented default by the United States on its debt obligations off the table. The bill would allow the government to keep borrowing to pay investors in Treasury bonds as well as Social Security recipients. Federal workers and retirees, soldiers and veterans would not get paid until the debt limit was raised.

All Democrats on the committee voted against the measure ,and the Obama administration has rejected a piecemeal approach to meeting the government's obligations. The bill now goes to the full House.

In addition to facing a fall deadline for raising the debt limit, Congress also faces an Oct. 1 deadline for approving a budget for the start of a new budget year. Without a new budget, portions of the government would be forced to shut down until the spending impasse is resolved. The last partial government shutdown lasted for 16 days in October 2013.

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