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US 2007 Budget Deficit Falls to $163 Billion

by Mike Godfrey,, Washington

15 October 2007

Henry M. Paulson, Jr., US Treasury Secretary, and Jim Nussle, Director of the Office of Management and Budget, have issued a joint statement commenting on the Budget Results for Fiscal Year 2007.

The statement shows the actual budget totals for the fiscal year (which ended September 30, 2007) finished with a deficit of $163 billion; total receipts of $2,568 billion and total outlays of $2,731 billion.

Paulson commented: "This year's budget results demonstrate the remarkable strength of the US economy. This strength has translated into record-breaking revenues flowing into the US Treasury and a continued decline in the federal budget deficit. President Bush's fiscal policies have helped promote economic growth and steady job creation. We must keep taxes low and restrain federal spending to continue the economic expansion in the wake of credit market disruptions and the housing market downturn. Shrinking the budget deficit and keeping the economy strong are critical elements to help us address the coming wave of entitlement spending. We must work together to find a solution to this problem, or we will cripple future generations with obligations they cannot afford."

Overall, receipts in FY 2007 were 6.7% higher than in FY 2006, marking the third consecutive year in which receipt growth outpaced growth in GDP. Receipts rose from 18.5% of GDP in FY 2006 to 18.8% of GDP in FY 2007. This level of receipts is above the 40-year historical average of 18.3%.

Total receipts for FY 2007 were $2,568 billion, $6 billion lower than the MSR estimate of $2,574 billion.

Individual income taxes were $1,163 billion, $5 billion lower than the MSR estimate. An accounting adjustment based on more recent data reallocated $3 billion less than had been expected in withheld tax payments from the Social Security and Medicare Trust Funds to individual income taxes, reducing withheld individual income taxes $3 billion below the MSR estimate.

Corporation income taxes were $370 billion, $1 billion lower than the MSR estimate. Lower-than-estimated corporate tax payments of $2 billion, which were partially offset by lower-than-estimated refunds, were responsible for the difference in collections relative to the MSR.

Other sources of receipts (excise taxes, customs duties, estate and gift taxes, and miscellaneous receipts) were $164 billion, the same as the MSR estimate, due to small offsetting changes among these sources of receipts.

OMB Director Jim Nussle observed that: "This year's budget results further demonstrate how the President's tax relief, combined with spending discipline, has helped promote a sustained economic expansion, which led to revenue growth, and resulted in a declining deficit. Our short-term budget outlook is improving, but beyond the horizon is a huge budgetary challenge – the unsustainable growth in Social Security, Medicare and Medicaid. The President has proposed reasonable changes that begin to fix this serious problem. For the sake of our children and grandchildren, Congress should begin to take action to prevent this fiscal train wreck."

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