WASHINGTON The budget deficit for January likely shrank to just $2 billion, the Congressional Budget Office said on Thursday, leaving the Treasury Department with ample capacity to stave off default after a debt limit extension expires on May 19.
The small deficit, $26 billion less than the budget gap in January 2012, means that the Treasury consumed very little of the resources under the so-called extraordinary cash management measures it can use to stay under the debt limit.
Treasury began deploying these measures, which include dipping into federal employee pension funds, around January 1 as it reached the $16.4 trillion statutory debt limit.
Congress on January 31 passed a measure that allows Treasury to borrow sufficiently to meet federal obligations until May 19, at which time another increase in the federal debt limit will be needed.
But even if no increase is granted, Treasury will be able to stave off a final day of reckoning until late July or early August by redeploying its extraordinary cash management measures. These measures allow it to claw back about $220 billion worth of borrowing capacity.
CBO said U.S. receipts were about $36 billion, or 15 percent, higher in January 2013 than a year earlier, partly as a result of a $9 billion increase in payroll tax collections after a temporary reduction had expired on January 1.
Outlays were up $10 billion in January compared with a year earlier, largely as the result of increased spending on the Medicare and Medicaid healthcare programs and Social Security retirement benefits.
For the first four months of fiscal 2013, which began on October 1, the nonpartisan budget referee agency estimated that the Treasury will record a $295 billion deficit, about $54 billion less than the shortfall for the same period a year earlier. Had it not been for calendar shifts of benefit payments in the prior fiscal year, the four-month deficit would have been $84 billion lower.
The Treasury is expected to report its January budget data on February 12.
CBO earlier this week forecast that if Congress enacts no further tax or spending legislation this year and allows full implementation of automatic spending cuts on March 1, the government will end fiscal 2013 with a deficit of $845 billion. This would be the first deficit under $1 trillion since President Barack Obama took office in 2009.