Rand Paul is complaining about trillion-dollar deficits. Republicans are gearing up for more brinksmanship, the threat of default, and shutdowns over the massive deficits. President Obama and much of official centrist Washington still dream of a grand bargain, implausible as that may seem. Ideology seems to hold that the massive, 13-figure annual federal deficit is killing the economy.
The most recent Treasury Monthly Statement (PDF), released Monday afternoon, updates the figures through July. It wasn’t quite as glorious a month as June, when quarterly corporate and personal income taxes and massive dividends from Fannie Mae and Freddie Mac swelled the nation’s coffers. But it was still pretty good.
In July, the government took in $200 billion in revenues, up 8.3 percent from July 2012. Spending was $297.6 billion, up 17 percent from July 2012. As a result, the deficit for the month was $97.6 billion, up 40 percent from June 2012. The monthly figures tend to bounce around a lot. If an entitlement payment comes on July 31 one year and then hits on Aug. 1 the following year, it can really skew the monthly totals. The same holds for the due date of tax payments.
So it makes more sense to look at the trend. We have now completed 10 of the 12 months of fiscal year 2013. And so far, revenues, at $2.287 trillion, are up 13.8 percent from $2.009 trillion in the first 10 of fiscal 2012. Meanwhile, spending, at $2.894 trillion, is off by 3 percent from the first 10 months of fiscal 2012. As a result, the deficit, at $607.4 billion through the first 10 months of fiscal 2013, is off $367 billion, or 38 percent, from $971 billion in the first 10 months of fiscal 2012.
Two months remain in fiscal 2013. In September, the government typically runs a surplus—it’s another one of the months when companies and individuals make big quarterly payments. If current trends remain intact, the government will essentially break even over the next two months, and the deficit for the full year will wind up somewhere close to where it was through the first 10 months.
So as you listen to people complaining about the annual deficit, remember that it is melting away. The miracle cure for deficits, it turns out, isn’t ripping up the social safety net, or a grand bargain. It’s growth, combined with some fiscal restraint, and higher taxes. Compared with a year ago, there are about 2.2 million more people working today, at slightly higher wages, paying slightly higher taxes. The combination of those forces pushes collections higher. Meanwhile, spending on anti-poverty programs like unemployment benefits falls as unemployment claims decline. Winding down the wars in Iraq and Afghanistan has reduced the Pentagon budget. And the sequester has taken a bite out of the budget of many agencies. The combination of those forces pushes spending lower. The latest update on this year’s fiscal situation confirms that each of these trends is fully intact.