Good News on America’s Debt Front

“A couple of updates …

From Goldman Sachs economist Alec Phillips: The Federal Budget Deficit: Shrinking Faster:

The federal deficit continues to shrink. Through the first six months of the fiscal year, revenues have come in higher than expected, while spending has come in lower than expected. As a result we are lowering our deficit forecast for the current and next two fiscal years.

Earlier this year we lowered our FY2013 deficit forecast from $900bn (5.6% of GDP) to $850bn (5.3%). In light of recent trends, we are lowering it again to $775bn (4.8%). Spending in the fiscal year to date is lower than a year ago and the nominal growth rate is lower than it has been in decades. Revenues have also exceeded expectations, with a 12% gain fiscal year to date. What is more notable is that the strength in revenues preceded the payroll tax hike at the start of the year, and the spending decline does not seem to reflect sequestration, which has just started to take effect.

We expect the improvement to continue for the next few years….”

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