A federal budget surplus? Yes, in January 2013

There is so much budget talk that’s inaccurate.

We’re often told the federal spending is surging when it’s not. 

We’ve also heard that the deficit is growing, but it has been declining rapidly and it plunged in December 2012. (See also the graph at the bottom of this post.)

Now comes the news that there was an actual federal budget surplus in January 2013. As a report by the Reuters news service explains, most of the surplus came from the new taxes brought in from the fiscal cliff deal. There is clearly a year-to-year change.

The surplus compared with a $27 billion deficit in January 2012. The January surplus means the government’s cumulative deficit for the fiscal year, which starts in October, is $290 billion, 17 percent lower than the comparable first four months of fiscal 2012.

Of course, what happens in a month or two does not a longer trend make.

And if the automatic, across-the board budget cuts — the so-called sequester — go through, estimates are that it would lead to job losses between 750,000 and one million. Furthermore, the Congressional Budget Office (CBO) has projected that “growth would be about 1.5 percentage points faster in 2013 if not for fiscal tightening including the sequester.”

Slower growth would hurt the fiscal situation, with layoffs creating more costs for unemployment insurance and health programs and leading to less tax revenue.  If that happens, the one month surplus would be a blip and deficits would again rise.

Addendum: Over a longer budget period, health care costs are projected to contribute to deficits. There are numerous ways to deal with that, including spending less and increasing sources of funding to pay for it. Moreover, we are now seeing a significant slow-down in health spending, to the point that the CBO now projects 15% less spending in 2020, a decline of $200 billion.


And here’s that graph on federal deficit, via the Investor’s Business Daily.

Bars above the line are times of deficit reduction, while bars below the line show increasing deficits.

Amy Fried

About Amy Fried

Amy Fried loves Maine's sense of community and the wonderful mix of culture and outdoor recreation. She loves politics in three ways: as an analytical political scientist, a devoted political junkie and a citizen who believes politics matters for people's lives. Fried is Professor of Political Science at the University of Maine. Her views do not reflect those of her employer or any group to which she belongs.