US budget gap narrows as April posts surplus
The United States's yawning annual budget deficit narrowed in April as government coffers brimmed with the largest monthly surplus in five years, official data released Friday showed.
The federal budget had a surplus of $112.9 billion for the month of April, as payments surged ahead the mid-month due date for annual income tax filings for 2012, according to Treasury Department numbers.
The surplus was almost double the $59.1 billion surplus registered in April 2012.
Over the first seven months of the fiscal year, the US budget deficit was $487.6 billion, 32 percent smaller than the October-April 2012 period.
Revenues leaped 28 percent in April from a year ago, to $406.7 billion, helped in part by January 1 increases in payroll and other taxes.
Expenditures fell a hefty 13 percent to $293.8 billion in the second month of severe "sequester" spending cuts, aimed at slashing $85 billion through September.
"With the April 15 tax filing deadline past, the full impact of the recent change in tax policy is coming into focus, and it is greater than expected," said Brian Kessler of Moody's Analytics.
The numbers were good news in another way: they give the Treasury more room to work while politicians battle over the deficit after a cap on its borrowing falls into place on May 18.
"The improved budget deficit will give the Treasury more wiggle room to finance government programs should Congress fail to raise the debt ceiling when the current suspension of this limit on government borrowing expires," said Sal Guatieri of BMO Capital Markets.
Treasury Secretary Jacob Lew told CNBC television Friday that the government could continue without new borrowing needs into September.
"The debt limit will be reached in just a few days when it expires on May 18, but because of the cash flows we can predict that we will be okay until Labor Day (September 2)," Lew said from London.
However, Lew warned, "Congress should deal with this right away."
"The anxiety caused to the US and world economy by putting this off until the last minute is not good."
Republicans are seeking to force the Obama administration to dramatically cut government spending and reform entitlement benefits like Social Security and Medicare, the health-care program for the poor, in exchange for a debt ceiling increase.
Both sides are seeking to avoid a repeat of the disastrous debt-limit battle in 2011 that cost the United States its coveted AAA credit rating for the first time, roiling financial markets worldwide.
Standard & Poor's, in announcing the downgrade in August, cited "political brinkmanship" that raised the risks of a US default.
It was the first time the US was downgraded since it received an AAA rating from Moody's in 1917; it had held the S&P AAA rating since 1941.