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US Posted Smaller Budget Deficit In First Quarter Of FY ’07 January 9, 2007

Posted by notapundit in Congress, Economic News, US News.
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WASHINGTON (Dow Jones)–The U.S. government amassed an $85 billion budget deficit in the first quarter of fiscal year 2007, which began Oct. 1, about $35 billion less than in the same period last year, according to Congressional Budget Office estimates released Monday.

In August, the CBO estimated that the total budget deficit for fiscal year 2007 would be $286 billion, up from a deficit of $248 billion for fiscal year 2006. The CBO plans to revise its estimate for fiscal year 2007 later this month.

Outlays through December were essentially flat relative to the first quarter of fiscal 2006, with spending increases in some programs offsetting spending reductions elsewhere. For example, while payments to Medicaid fell, payments to Medicare jumped nearly 22% because of the new prescription drug program, and defense spending rose nearly 11% from the year before.

Meanwhile, federal revenue continued to rise, buoyed by corporate income taxes.

The largest cost reduction for the government came in the form of lower spending for flood insurance and disaster assistance in the wake of the 2005 Gulf Coast hurricanes, the CBO said. The government also earned a $12.7 billion windfall with the auction of licenses for the broadcast spectrum.

“While any report of short-term improvement in the deficit is welcome, the long-term forecast for the federal government’s budget deficit remains troubling,” House Budget Committee Chairman John Spratt, D-S.C., said. “The near-term deficit improvement for the first quarter unfortunately does not change the bleak long-term budget outlook, and we must not underestimate the size of the challenge that lies ahead.”

By John Godfrey, Dow Jones Newswires

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