US budget deficit falls below 3% of GDP in 2014: CBO

[WASHINGTON] The US budget deficit fell to 2.8 per cent of the economy's output in fiscal year 2014, as government revenues rose sharply, official data showed Wednesday.

The federal government's deficit was US$486 billion in the fiscal year that ended on September 30, down from US$680 billion, or 4.1 per cent of gross domestic product, in fiscal year 2013, the Congressional Budget Office (CBO) said in a preliminary estimate.

The Treasury will publish the actual fiscal 2014 deficit later in October.

As a percentage of output the deficit has fallen for five straight years from the peak of the Great Recession, in fiscal 2009, when it swelled to 9.8 per cent of GDP.

The large decline in the 2014 deficit was due to a nine per cent increase in receipts, mostly taxes, offset by a modest 1.0 per cent rise in spending, according to the CBO, the independent, nonpartisan budget agency of Congress.

Defense spending in particular fell, by 5.0 per cent, and outlays for unemployment benefits tumbled 34 per cent as an emergency jobless compensation program expired at the end of December 2013.

By contrast, spending on the government's largest benefits programmes, such as Social Security for retirement and Medicare and Medicaid for health care, rose 11 per cent.

The mounting costs of those programs, which account for half of federal spending, have long been the focus of pressure on lawmakers to reign in the outlays, but political gridlock in Congress has blocked reforms.

The Republican opponents of Democratic President Barack Obama took control of the House of Representatives in 2011. Since then they have pushed through spending reductions, notably after forcing a 16-day government shutdown in October as fiscal 2014 got under way.

Republicans and Democrats are at odds over spending; conservatives are keen on slashing the deficit by cutting some social spending while boosting defense funds, but Obama supports more help to low-income families and infrastructure improvement. - AFP