US Runs Smaller December Budget Surplus As Spending Surges

The United States posted a $$2 billion budget surplus in December, booking a smaller windfall compared to December 2013 as Fannie Mae and Freddie Mac’s made less payments. Economists had expected a $3 billion surplus.

Fannie and Freddie have been repaying the U.S. Department of the Treasury following their bailout by the government in 2008, and in December 2013 paid $39 billion. In December 2014, the total of their payment was $6.8 billion. Last year, both Fannie and its counterpart Freddie wrote particularly large checks to the Treasury, by reporting deferred tax assets as profits.

For the first quarter of fiscal 2014, the U.S. government’s budget deficit increased 2% year over year to $177 billion. That includes the December surplus. The government has increased its spending by 44% to $333 billion in December from the same month last year. For the fiscal YTD, expenditure grew 9% year-over-year to $916 billion.

Total receipts in December showed a rise of 18% to $335 billion. It collected more individual and corporate tax receipts in the month. Corporate receipts rose 34% last month, during which corporations filed their final quarterly projected returns for the 2014 tax year.

“There was a calendar quirk in 2013 that pushed some of the spending into November, so spending may appear to be higher than that in December,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, said before the report. “But if you look at the underlying trend, the deficit hasn’t been an issue.”

Total receipts moved to $739 billion in the first three months of fiscal 2015, representing an increase of 11% from the same period in fiscal 2014.

The December 2013 surplus was $53 billion, for which the Treasury said that the difference was partly due to shifts in the timing of some transactions. Excluding the timing shifts, the December surplus was expected to be $11 billion, Treasury said.

Deficits have been reduced versus a peak of $1.4 trillion in 2009, thanks to the improved finances and the economic recovery. The deficit for fiscal 2014 ended in September was recorded as $483 billion, the lowest of Barack Obama’s presidency.

The Congressional Budget Office is looking for the shortfalls to move down again in fiscal 2015, to $469 billion. But the CBO seem not to agree as has warned that deficit are expected to start increasing in 2016 as the government spends more on health-care and retirement programs for baby boomers. Meanwhile, the nonpartisan agency predicts federal debt held by the public will grow to 77% of GDP in 2024 from 74% if no changes are made to current policies.

“The improvements in the short-term deficit are positive, and importantly, reflect the improving economy,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget. “But the longer-term debt situation remains unsustainable, and policy makers should not take the short-term respite as an excuse to hide from these issues.”

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