Shocker: U.S. Treasury to Pay Down Debt!

For the first time since the June quarter of 2007, the U.S. Treasury is expecting to pay of $35 billion of debt during the June quarter this year. The payoff assumes an end-of-June cash balance of $75 billion.

The combined effects of a payroll tax increase beginning in July and the cost savings of $85 billion from the forced sequestration of government spending have led to higher receipts and lower outlays.

The surplus, though small compared with a projected federal deficit this year of nearly $1 trillion, is not insignificant. It signals that the federal deficit is falling, as some economists said it would.

Remaining is the question of whether the deficit will fall enough or too quickly. Given the weak initial report on first quarter GDP, trimming the budget deficit too fast could weigh even more heavily on the economy.

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