WASHINGTON (Reuters) - America’s budget deficit shrank in August compared to a year earlier, with government accounts helped by tax hikes and an improving economy.
The federal government sank $147 billion further into the red last month, the Treasury said on Thursday.
Washington this year has taken in only about seven cents in revenue for every dollar it spends, extending a decades-long trend of deficit spending.
The deficit widened sharply during the 2007-09 recession, which hit tax revenues and increased payments for unemployment benefits.
But lately the budget gap has been shrinking, and in August is was well below the $191 billion deficit registered in the same month of last year.
That is partly because an improving economy boosted tax receipts last month, as did higher tax rates enacted in January, a Treasury official said in a briefing with reporters on the budget numbers.
Last month, the government took in $185 billion in revenues, about $7 billion more than was absorbed in August 2012. So far over the full fiscal year, which began in October, revenues are up 13 percent.
Government accounts also appear to have been aided in August by Washington’s move in March to slash spending under a budget mechanism known as the “sequester.”
Federal spending fell 10 percent in August from a year earlier. For the fiscal year so far, spending is down about 4 percent.
Reporting by Jason Lange; Editing by Andrea Ricci