WASHINGTON (AP) — The federal government started the new budget year with a higher deficit in October than a year ago, but the increase reflected quirks in the calendar rather than a deterioration in the government's budget outlook.
The deficit last month was $121.7 billion, up $31.1 billion from a year ago, the Treasury Department reported Thursday. However, that deterioration reflected the fact that the government had to send out $41 billion in November benefit payments in October because Nov. 1 fell on a Saturday.
October is the first month in the 2015 budget year.
The deficit for 2014 dropped to $483.3 billion, the smallest imbalance since 2008. The expectation is that the deficit will improve further this year. The Congressional Budget Office is projecting a $469 billion deficit for 2015.
But the CBO is forecasting the deficits will start rising for the rest of the decade as baby boomers retire and Social Security and Medicare costs rise. The CBO and other budget experts have warned that the current trajectory for the deficit is unsustainable and eventually could lead to a fiscal crisis.
For October, receipts totaled $212.7 billion, up 6.9 percent from October a year ago. Spending totaled $334.4 billion, 15.5 percent higher than a year ago, but a figure that was boosted by the calendar shift for benefit payments.
The $483 billion deficit for 2014 was the smallest since George W. Bush's last full year as president. When measured against the size of the economy, the deficit equaled 2.8 percent of gross domestic product, below the average for the last four decades. By comparison, the deficit for 2013 was $680 billion, or 4.1 percent of GDP.
The 2014 deficit mean the government borrowed 14 cents of every dollar it spent. Six years ago, that figure was 40 cents of borrowing for each dollar spent.
That sizable borrowing reflected deficits that topped $1 trillion annually for four consecutive years from 2009 to 2013 as the government struggled with a deep recession, which cut into tax revenues and forced higher spending for safety-net programs such as unemployment benefits and food stamps.
The improved deficit picture for 2014 reflected slower growth in spending due to lower-than-expected health care costs as well as a 2011 budget pact with Republicans that sharply curbed agencies' operating budgets. Obama reached agreement with Republicans in Congress for a tax increase on upper bracket earners at the beginning of 2013.
Since the tax increase at the beginning of 2013, the GOP-controlled House and Obama have steered clear of further large-scale efforts to reduce the deficit. Instead, a budget deal last December reversed agency budget cuts known as sequestration.
But with Republicans winning control of the Senate in November's elections, they are expected to try to rein in the deficit even further. However, Obama has said that any large-scale budget deal needs to include higher taxes, something the Republicans oppose.