ECONOMICS -- October 30, 2013 at 6:37 PM ET
Deficit declines by 38 percent in 2013
Image courtesy of the Office of Management and Budget
The federal government's deficit declined by 38 percent in fiscal year 2013, which ended Sept. 30.
The deficit fell to $680 billion, down $409 billion from fiscal year 2012, Office of Management and Budget Director Sylvia Mathews Burwell and Treasury Secretary Jacob Lew announced in a joint statement Wednesday afternoon. The deficit measures the amount by which expenditures exceed revenue.
The size of this year's deficit was also $293 billion less than President Barack Obama predicted it would be in his fiscal year 2014 budget released in April. The White House celebrated the fact that as a percent of GDP, the deficit declined by half from what it was when Obama took office in 2009.
So why did the deficit decrease? The statement points to higher receipts, or taxes, which accounted for 79 percent of the decline. The government collected more money because a stronger economy increased the earnings on which people were taxed and because certain tax provisions, such as the payroll tax cut, expired. Tax levels also increased for Americans above a higher income threshold.
But the deficit also declined because the government spent less money. The withdrawal of troops from Afghanistan reduced defense spending, while lower unemployment rates meant the government spent less money on unemployment insurance. The across-the-board spending cuts, known as sequestration, also cut spending for many government agencies.