The Congressional Budget Office (CBO) projects the FY2013 federal budget deficit will be under $750 billion, the first year since 2008 (-$458 billion) that the deficit has been under $1 trillion.
U.S. Treasury data that show the deficit for the first 11 months of FY2013 was $753 billion, a $411 billion improvement over the same period last year. Based on these actual results, CBO estimates that the deficit for the full fiscal year will be below that figure because revenues are expected to be higher than expenditures in September.
In May, CBO estimated that the deficit for FY2013 would be $642 billion. In its Mid-Session review of the budget in July, the Office of Management and Budget (OMB) estimated the FY2013 deficit would be $759 billion.
The improving deficit is due to increased revenue and a slight decline in expenditures. Revenues were 13 percent higher in the first 11 months of FY2013, compared to FY2012, while expenditures were $127 billion lower.
Revenue increases are led by higher income and corporate tax receipts, which were both up by 16% in the first 11 months. CBO attributes the growth in individual tax receipts to higher income and in corporate tax receipts to higher taxable profits. Social insurance receipts were 12 percent higher than in the first 11 months of FY2012 because of the expiration of the 2 percentage point payroll tax deduction for social security.
Expenditures for discretionary programs are lower primarily because of the automatic spending cuts required by the Budget Control Act. Defense outlays are down by 7 percent in the first 11 months due to sequestration and reduced operations in Afghanistan, according to CBO. Net transfers for activities related to Fannie Mae and Fannie Mac are down by $87 billion and outlays for the Troubled Asset Relief Program (TARP) are $33 billion lower than in the previous year.