During the fiscal year ending September 30, 2013, the US deficit amounted to $680 billion or 4.1% of the country’s GDP. This deficit is 38% below the 2012 fiscal year deficit of $1.09 trillion and the smallest the deficit has been in five years. Moreover, the US government reported a $75 billion surplus for the month of September 2013.
According to the Treasury Secretary, Jack Lew:
“The nation’s deficit has fallen for the past four years, the fastest pace of decline over a sustained period since World War II. It is now less than half of what it was when the president took office”.
Why has the deficit fallen?
The deficit has decreased as a result of an increase in government revenue and relatively lower spending on behalf of the government. Specifically, revenue from corporate taxes and individuals taxes rose 11 percent over 2013 levels. This increase occurred due to an improving US economy and higher tax rates implemented at the beginning of 2013. In addition, US government spending decreased 2 percent or $3.5 trillion over the 2012 numbers. In all, for every dollar the US government spent, it took in approximately 80 cents. Further, USGovernmentSpending.com analysts believe that after a growing for a short period of time in 2014, the deficit will continue to decrease in the coming years.
Republicans and Democrats tackle the deficit
The very same day that this deficit was announced, a special House-Senate conference committee began to work towards: (a) creating a budget resolution that will pass and (b) planning a government spending strategy for the longer term. However, these tasks proved to be challenging as Republicans favored more spending cuts and no tax increases while the Democrats proposed fewer spending cuts and an increase in revenue from taxes. That said, some experts believe ultimately that US defense industry spending cuts may likely occur.
Overall, while the US deficit is the lowest it has been in some time, there are indeed still some challenges to overcome.
