(Adds details from report, comments on deficit reduction)
By David Lawder
WASHINGTON, Oct 15 (Reuters) - The U.S. budget deficit fell by nearly a third to $483 billion in fiscal 2014, the lowest level since 2008, as a quickening economic recovery boosted tax collections and spending grew only modestly, the Treasury Department said.
The deficit, down from $680 billion last year, was the lowest since a $459 billion budget gap in fiscal 2008, which was followed by four straight years of $1 trillion-plus deficits in the wake of the financial crisis.
U.S. Treasury Secretary Jack Lew and White House Budget Director Shaun Donovan hailed the data on Wednesday as a “return to fiscal normalcy” as the 2014 deficit fell to 2.8 percent of gross domestic product. That was the lowest since 2007 and a smaller share of the economy than the annual average for the last 40 years.
Lew told a news conference the United States was now in a period of fiscal sustainability that is providing a strong foundation for growth.
“What I don’t think we have is an emergency right now,” Lew said. “The challenge we have is to sustain the economic engine so that we’re seeing the growth now and over these next 10 years.”
The improving fiscal picture has sapped the urgency for a major budget deal between Congress and the White House aimed at slashing deficits by trillions of dollars over the next decade and starting to reduce the $17.8 trillion federal debt.
Lew insisted he has not given up on further deficit reduction, but said budget savings could not come at the expense of economic growth.
Both Lew and Donovan said growth and revenues in 2014 were helped by the easing of across-the-board budget cuts that went into effect last year, along with the lack of a fiscal crisis such as last year’s federal government shutdown.
Donovan told Reuters on Tuesday he wanted to further reduce those budget cuts next year and would be willing to consider some savings to mandatory spending programs to reach a deal with Republicans, who control the U.S. House of Representatives.
Fiscal 2014 revenues grew 9 percent to $3.02 trillion, boosted by a jump in individual and corporate tax receipts and a 31 percent rise in Federal Reserve earnings, mostly from the central bank’s massive bond portfolio.
Outlays grew just 1 percent to $3.50 trillion.
For September, the Treasury recorded a budget surplus of $106 billion, up from a year-ago surplus of $75 billion. Analysts polled by Reuters had expected a $80.9 billion surplus for the final month of fiscal 2014.
Receipts last month grew 17 percent to $352 billion while outlays were up 9 percent to $246 billion.
The Congressional Budget Office has forecast a $469 billion deficit for fiscal 2015, which started on Oct. 1. It expects deficits to rise again later this decade as costs associated with an aging population mount.
“A nearly $500 billion deficit is nothing to celebrate,” said a spokesman for House Budget Committee Chairman Paul Ryan, a Republican who has been touted as a possible 2016 presidential candidate. “And CBO still projects that, in the coming years, the deficit will rise even higher to unsustainable heights.” (Reporting by David Lawder; Editing by Paul Simao)