The Congressional Budget Office has reported a $97.6 billion deficit in July and continues to predict a 2013 annual budget gap sinking to a five-year low. The July deficit raises the 2013 budget year gap to $607.4 billion, 37.6 percent lower than the $973.8 billion deficit during the first 10 months of 2012. The current annual deficit forecast by the CBO is $670 billion for the budget year ending September 30, well below the deficit of $1.09 trillion posted last year.
This mark would be the first time since 2008 that the budget deficit would fall below $1 trillion. Higher taxes, improved growth of the economy, and federal spending cuts have helped shrink the deficit and increase dividends from Fannie Mae and Freddie Mac. However, continuing Congressional budget fights over raising the government’s borrowing limit and a spending plan for the next budget year could complicate the economic picture. A particularly bleak view feared by some investors is a government default on debts thanks to intransigence on both sides of the Congressional aisle.
The government collected $2.29 trillion in revenue through July, an increase of 13.9 percent over the same period in 2012. Spending totaled $2.89 trillion, down 2.9 percent from one year ago. This spending decline is a direct result of government spending cuts put into place on March 1. Government deficits increase the national debt, which now sits at $16.7 trillion.