June Federal Deficit

June wraps up the third quarter of our government’s fiscal year and the Treasury Department reports the annual deficit to date reached $365.9 billion.  While that is a hefty sum, it is down 28% from the level it hit this time last year.  In fact, for the month of June, our government actually recorded a $70.5 billion surplus.

To what can we ascribe this significant improvement?  Two factors loom large.  First, defense spending has fallen 5.5% as we continue to sequester some spending while drawing down our overseas presence.  Simultaneously, stronger economic growth has boosted tax receipts by 8.8% over this time last year.

While it seems encouraging to see the federal deficit shrinking, we must remember that it also reflects slower spending by a significant consumer.  Some economic theory suggests government outlays are crucial when businesses and the public at large are putting their wallets away.  Do we see any evidence therefore that these two groups are returning with renewed vigor to America’s marketplace?  Not really, nor do we get a sense that demand from our foreign trading partners is accelerating either.  That’s not to say things are rotten, but they do seem ripe for a return to something even less favorable than today’s anemic pace of growth.  For the past several years it seems the only player with any plan to get things rolling again has been the Federal Reserve and lately they have been slowing the pace of their quantitative easing program.  What can pick up the slack now?  Here at Atlas we are anxiously awaiting that white hat upon a white horse which is supposed to come galloping in at times like these.  Where’s Hoppy when we need him?

(by J R)