WASHINGTON (AP) — The U.S. Treasury said Friday that it took in a rare surplus of $113 billion in April, the largest in five years.
Steady economic growth and higher tax rates have boosted the government’s tax revenue, keeping this year’s annual budget deficit on pace to be the smallest since 2008. A smaller deficit is also likely to give negotiators more time to work out a deal on raising the nation’s borrowing limit.
Through the first seven months of the budget year, the deficit was $488 billion. That’s lower than last year’s deficit of $720 billion over the same period.
Even with the April surplus, the deficit for the full year will still be quite large: The CBO expects it will reach $845 billion. That would be down from $1.1 trillion in 2012 and the first annual deficit below $1 trillion since 2008.
The federal deficit represents simply the annual difference between the government’s spending and the tax revenues it takes in. Each deficit contributes to the national debt, which recently topped $16 trillion.
A smaller deficit is taking pressure off negotiations to raise the federal borrowing limit. Lawmakers and the Obama administration agreed to suspend the borrowing limit until May 18. But higher revenues and less spending could push the deadline off until the fall.
One reason is revenue has risen 16 percent so far this budget year to $1.6 trillion. That’s the biggest tax haul for the October-April period on record, a senior Treasury official said. The government will also benefit next month from a $59.4 billion payment from mortgage giant Fannie Mae and a $7 billion payment from Freddie Mac. The mortgage giants are profitable again and are paying dividends to the government in return for the loans they received during the financial crisis.
Treasury Secretary Jacob Lew said in an interview with CNBC Friday that in part because of Fannie’s payment, the government’s borrowing limit won’t be reached until “at least after Labor Day” in early September.
There is usually a surplus in April because that is when the government receives an influx of annual tax payments. But tax receipts this April are 28 percent higher than in April 2012.
The increases partly reflect higher tax rates. Social Security taxes rose 2 percentage points Jan. 1 after a two-year cut expired. Income tax rates for the highest-earning 1 percent of the population also rose.