Federal spending continues to drop and, combined with this year’s tax increases, the healthier fiscal operations are making a dent in the federal deficit, according to the latest numbers released Friday by the Congressional Budget Office.
Defense spending dropped by $10 billion in October and November, and other basic government activities outside of Social Security, Medicare and Medicaid dropped by $13 billion.
Combined with an improving economy, which is boosting wages, and with the tax increases that President Obama and Congress agreed to at the beginning of the year, the federal deficit was down $61 billion, or more than 20 percent in the first two months of fiscal 2014, which started Oct. 1.
The numbers are more good news for the federal budget, which ended fiscal 2013 with the first sub-$1 trillion deficit since President Obama took office.
So far through the first two months of fiscal 2014, the government has spent $612 billion and taken in $380 billion, meaning it borrowed nearly 38 cents of every dollar it spent. October and November are traditionally slow months for tax receipts.
The deficit has dropped precipitously over the past year as Mr. Obama’s stimulus spending subsided, the economy improved, and the tax increases and spending cuts agreed to since 2011 have begun to bite.
Foremost among those tax increases was the expiration of the payroll tax cut, which funds Social Security.
Meanwhile, the key spending cuts have come via the budget sequesters, which are automatic across-the-board trims that kicked in last year.
The next round of sequesters is slated to take effect Jan. 15, but negotiators are trying to work out a deal to restore some of that spending, which could reverse some of the progress, depending on how they write the agreement.