WASHINGTON (AP) _ The federal deficit is running sharply lower through the first eight months of this budget year as growth in revenues continues to outpace the growth in spending.
The Treasury Department said that the deficit through May totaled $148.5 billion, down 34.6% from the same period a year ago.
That improvement came even though the deficit in May increased to $67.7 billion, up 57.8% from May 2006. However, analysts attributed this big increase to the fact that the Internal Revenue Service was more efficient in processing tax returns this year, meaning more revenue was collected in April with fewer tax collections left to be counted in May.
For the year, revenue and spending are both at record levels. Revenue gains are up 8% while outlays are up at a slower pace of 2.5%, compared to the same period a year ago. Growth in spending has been slower this year in part because of the absence of last year's huge outlays for hurricane relief.
The increase in revenues has been supported by continued strength in corporate profits and low unemployment, which has helped to push individual income taxes higher.
For the 2007 budget year, which ends on Sept. 30, the Congressional Budget Office is projecting a federal deficit of $177 billion. That would be down 28.7% from last year's imbalance of $248.2 billion, which had been the lowest deficit in four years.
The federal budget was in surplus for four years from 1998 through 2001 as the long economic expansion helped push revenues higher.
In the budget President Bush sent Congress in February for 2008, he projected that the government can return to a surplus by 2012 even if his first-term tax cuts are made permanent.
Democratic critics, however, contend that Bush's spending blueprint was based on unrealistic assumptions and left out major spending items such as the full costs of the Iraq war. They also argue that the current improvement in the deficit will be only temporary as the 78 million baby boomers retire, pushing spending on Social Security and Medicare up in coming years.