Good News Dwindles on Treasury Budget in April

Jon C. Ogg

Has the good news on the Treasury budget already run its course? The Treasury showed that it saw a surplus of $106.5 billion in April of 2016. The Wall Street Journal’s published consensus estimate was a budget surplus of $109 billion. Sadly, this is down from a $156.7 billion surplus seen in April of 2015 — and that was a 7-year high.

What matters here is that this was the month that the bulk of Americans send in their tax filings. One such issue here may be what the Treasury called a quirky calendar with May 1 being a Sunday affecting the payments.

If you back out any calendar issues, the number was still said to be about 6% shy of the prior year. Another sad issue here is that most recent projections are looking for the budget’s shrinking deficits to turn back into growing deficits in this year and beyond.

Spending was some 5% in April versus a year earlier, while individual and corporate tax receipts created a 7% drop in revenue.

To show the higher deficit trends in 2016, the first 7 months of this fiscal year was running at $355 billion. That is up 25% from a level of $283 billion this time last year.

This might matter in most other election years. In 2016, the trend of deficit reduction is just not much of an issue. Maybe the candidate that can grow the deficits the fastest, which of course means higher entitlement spending and likely a broader payrolls tied to the government, is the one who sounds the best.

As a reminder, many economists and investment banking forms are lowering their expectation for interest rates in 2016. That is due to slower economic readings, but at least it means that Uncle Sam will be spending less and less on interest payments.