U.S. Budget Deficit on Track to Narrow Substantially This Year

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By Jason Lange

WASHINGTON -- The United States ran a budget deficit in July, although government revenues increased from a year earlier due to tax hikes and a strengthening economy, a report from the Treasury showed Monday.

The U.S. government spent $98 billion more than it took in last month, with the deficit driven by spending on health-care programs, pensions for the elderly and the military.

Analysts polled by Reuters had expected deficit of $96 billion.

The United States customarily runs deficits in July as there are few tax deadlines during the month.

The country has run full-year budget deficits continuously since 2001, and the amount of red ink has grown immensely since 2009 when a surge in unemployment fueled higher spending on the social safety net.

But this year, the deficit appears on track to narrow substantially.

One major reason is that Washington ratcheted austerity efforts by raising tax rates, which has helped tax receipts. It has also slashed the federal budget, although in July total spending rose to $298 billion from $254 billion in the same month of 2012.

Another factor that has been leading to a lower deficit is the steam that appears to be gathering in the U.S. economy. That is also lifting tax receipts, which rose to $200 billion in July from $185 billion in July 2012.

So far in the current fiscal year, which began in October, the federal government has run $607 billion into the red, a narrowing from the $974 billion deficit chalked up in the same 10 months of fiscal year 2012.