No Surprises in June’s Federal Budget Deficit
|June’s budget deficit of $75 billion was in line with our expectations, and we remain of the view that the FY 2018 deficit will be about $775 billion. The stimulus impact from the recent budget deal is starting to become evident.
Budget Deficit Widening In Line with Expectations
- The federal budget deficit in June was $74.9 billion, almost exactly in line with our forecast of $75.0 billion. For the fiscal year as a whole, the budget deficit is about $80 billion wider than last year, with one quarter still to go. The boom in nonwitheld individual tax receipts (up 16 percent fiscal year to date) have helped ease some budget pressure; federal receipts as a whole are up just 1.3 percent for the year.
Government Spending Contributing to Growth
- As we have written previously, the federal budget deal reached in March will likely boost government consumption and investment, providing a near-term stimulus to growth separate from the tax cut. Defense spending is one sector where the growth is beginning to become evident (top right chart). We expect the deal to add a few tenths of a percentage point to real GDP growth in 2018, with the impact fading by the second half of 2019 (bottom right chart).
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