WASHINGTON (Reuters) - Government tax receipts grew at a healthy 6 percent pace in November as employment and wages improved, the Congressional Budget Office said on Friday, but the month’s deficit still rose, largely because of benefit payment calendar shifts.
Should the revenue growth trend continue, it could buy the U.S. Treasury Department slightly more time before it runs out of borrowing capacity early next year.
An increase in the federal debt limit is tangled up in the negotiations between President Barack Obama and Congress over how to deal with the year-end “fiscal cliff” of automatic tax hikes and spending cuts. Obama has sought permanent authority to lift the debt cap, while congressional Republicans intend to use the debt limit as leverage in their demands for deep cuts to federal health and retirement benefit programs.
The Treasury is on track to hit the $16.4 trillion debt limit December 31 when more government payments are due. It has a number of emergency maneuvers it can employ to keep borrowing for several more weeks.
Louis Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey, said Treasury could announce the first of these measures, suspending the sale of securities to state and local governments, as early as next week.
The move to suspend the so-called “slugs”, which are used by state and local governments to temporarily park the proceeds of their municipal bond issues, would allow the Treasury to gain more accurate control over its debt issuance.
As of Wednesday, the Treasury was just $95 billion below the debt limit.
The nonpartisan CBO said that for the first two months of the fiscal year that started October 1, receipts are $30 billion — or 10 percent — ahead of last year.
Much of the growth is coming from withheld income and payroll taxes from individuals — a sign that declines in unemployment and growth of wages are bearing fruit. These receipts are up $23 billion for October and November, or 8 percent from a year earlier.
Receipts from corporate income taxes, normally low at this time of year, declined slightly, but other revenues rose by $7 billion, or 22 percent. The Federal Reserve accounted for $4 billion of that increase, as it earned higher yields on the debt securities it holds, while excise tax receipts grew $2 billion.
The combined October-November deficit totaled $292 billion, about $57 billion more than the year-earlier period, CBO said. But it attributed the increase partly to the shift of December Social Security and other benefit payments into November. Without these shifts, the two-month deficit would have declined by $8 billion from year ago levels.
The shifts will also have the effect of reducing December’s outlays and deficit.
CBO said November’s deficit totaled $172 billion, up $35 billion from a year earlier. The U.S. Treasury is expected to announce final budget data for the month next week.
Excluding calendar shifts, U.S. government outlays are growing at a slightly slower pace, 3.7 percent for the first two months of the fiscal year compared to the prior-year period.
The biggest gains in outlays came from the programs that Republicans want to cut deeply: 8 percent each for the Social Security and Medicare programs for the elderly, and 9 percent for Medicaid, which serves the poor.
Net interest costs were up $2 billion, or 5 percent, but spending on unemployment benefits fell by $4 billion, or 22 percent.
Additional reporting by Rachelle Younglai. Editing by Fred Barbash and M.D. Golan