Six months ago, global finance officials meeting in Washington berated the U.S. for failing to put its fiscal house in order. This time, the critics were silent.
The Congressional Budget Office projected today that the 2014 deficit will be the lowest in six years and down more than 60 percent from the record $1.4 trillion in 2009. With the annual April 15 tax filing deadline looming, the U.S. has received about $80 billion more in income taxes this fiscal year than it had 12 months earlier.
The Treasury’s coffers are swelling as the almost five-year economic expansion gains momentum, generating more corporate and personal income-tax revenue and reducing spending on social services. Stronger growth, in turn, will depend less on government spendingto fuel growth than it has in the past.
“Without fiscal stimulus, we’ll see over the next year or two if the economy is really standing on its own two feet,” said Ira Jersey, a fixed-income and interest-rate strategist at Credit Suisse Group AG in New York. “We suspect it is. This means further improvement of the deficit over the next few years.”
More evidence of fiscal health came last week, when the Treasury Department reported a deficit of $36.9 billion, the smallest for that month in 14 years. Revenue increased 16 percent to $215.8 billion from $186 billion in March 2013. Spending totaled $252.7 billion, down 13.6 percent.
Corporate tax revenue may climb further as accelerating growth and declining unemployment boost sales and earnings. The International Monetary Fund, in a report last week, forecast a U.S. expansion of 2.8 percent this year and 3 percent in 2015, compared with 1.9 percent last year.