Budget deficit falls to $483B, a six-year low

The federal budget deficit fell in fiscal 2014 to the lowest level since 2008, the Treasury Department announced Wednesday.

For fiscal 2014, which ended Sept. 30, the shortfall was $483 billion, 2.1 percent of gross domestic product (GDP). Last year, the deficit was 4.1 percent of GDP.

In dollar terms, the fiscal 2014 deficit is the lowest since 2008, when the government ran a shortfall of $455 billion.

{mosads}It’s a “dramatically-reduced deficit,” Treasury Secretary Jack Lew told reporters at a morning briefing. “Coming down to below 3 percent of GDP is a meaningful step.”

“Many Americans certainly know the deficit has been coming down quickly,” Office of Management and Budget Director Shaun Donovan added.

As a percentage of GDP, the deficit is less than the average of the last 40 years, Donovan said, which indicates a “return to fiscal normalcy.”

The Treasury Department said the drop in the deficit over the last year was due to an increase in government revenue and relatively stable government spending.

In fiscal 2014, the government took in roughly $3 trillion — an increase of 9 percent in revenue compared with 2013.

The increase in revenue was due to a stronger economy and the expiration of certain Bush-era tax rates in January 2013 for people with high incomes.

Government spending increased in fiscal 2014 by 1 percent to $3.5 trillion. Spending dropped for several agencies and programs: the Defense Department, the unemployment insurance program, housing programs and flood insurance. Higher spending on Medicaid, Medicare and student loans accounted for the overall net increase, the Treasury Department said.  

Despite higher spending on the government’s healthcare programs for seniors and low-income people, Donovan said healthcare costs are down $200 billion since 2010, which he called a historic slowdown.

The government spent $936 billion on the Department of Health and Human Services in fiscal 2014, about $16.5 billion lower than what was estimated.

While they touted the fall in the deficit as progress for the economy, Donovan said the administration is still focused on sustaining positive growth for the long term.

“Too many Americans do not yet feel enough of the benefits,” he said.

“When they come back in November, Congress must past a full-year appropriations bill for the rest of 2015,” Donovan said. “Congress should also begin work on replacing sequestration” before it harms the economic recovery.

If Congress doesn’t pass another budget deal next year, across-the-board cuts could hit federal agencies in fiscal 2016.

Asked if the administration would accept relieved sequestration only for the Pentagon, Donovan said it’s “absolutely critical” that the cuts are also eased for other parts of the government.

The decreased shortfall is good news for the Obama administration, with less than three weeks away from the midterm elections. It also comes on the heels of the unemployment rate dropping to 5.9 percent, also a six-year low.

The government’s deficit is slightly lower than the Congressional Budget Office’s $486 billion projection last week.

— This story was updated at 11:19 a.m.