The U.S. Is Cutting its Deficit Faster Than it Ever Has Before
The latest US budget statement is due at 2 p.m. ET on August 12, and is expected to show that the US deficit continued to decline in July, falling to a consensus -$90.5 billion. That’s still in the red, to be sure. But it’s worth noting just how sharply US deficits have been declining. Check out this chart from economists over at Barclays.
How has the US done it? No giant mystery here: Spending has been falling and government tax revenue has been rising.
Ok, but why, exactly? Barclays economists say tax receipts are rising largely because of better individual tax revenue. And those are improving for a few reasons. Worker incomes are up a bit thanks to improvements in the job market. Taxes on capital gains from the buoyant US stock market are also helping. And then there’s the fact that tax rates rose thanks to the budget deal cobbled together with Congress late last year.