Federal Budget Deficit Declines By Almost One Third

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Includes: IEF, TLT, TRSY
by: Calafia Beach Pundit

With Wednesday's release of the February federal budget numbers, we find that two beneficial trends are continuing: revenues for the past 12 months are up 10.3% relative to a year ago, and spending is up only 0.1%. Revenues have been rising steadily for the past years, while spending has grown hardly at all.

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Strong revenue gains reflect growth in incomes and corporate profits, which is a good sign that the economy is recovering. Flat spending growth is a combination of reduced "social safety net" spending, another sign of the economy's improving health, and the gridlock in Congress that is preventing more runaway spending. For the 12 months ended February, the federal deficit was almost exactly $1 trillion: a big number still, but much less than the $1.48 trillion registered just three years ago.

The federal budget deficit has declined by almost one third in the past three years. That should be making headlines.

Because it means that economic growth and spending restraint are an easy way to eventually balance the budget. And it also means that spending restraint is not necessarily bad for economic growth.