WASHINGTON - The federal government reported a rare surplus for January and is on track to run the lowest annual deficit since President Barack Obama took office.
The Treasury Department said Tuesday that the government took in a surplus of $2.9 billion in January, helped by nearly $9 billion more in Social Security taxes. Last month Congress and the White House allowed a temporary cut in Social Security taxes to expire.
The monthly surplus was the first since September.
Congressional Budget Office Director Douglas Elmendorf is reflected on a table as he speaks about the office's annual Budget and Economic Outlook during a news conference at the Ford House Office Building in Washington, Tuesday. The federal budget deficit will drop below $1 trillion for the first time in President Barack Obama's tenure in office, a new report said Tuesday.
Through the first four months of the 2013 budget year, the deficit has grown $290.4 billion. That's nearly $60 billion lower than the same period a year ago.
Revenue through those four months is 12.4 percent higher compared with the same period last year, while spending has grown only 3.5 percent.
The budget year began on Oct. 1.
The Congressional Budget Office forecasts that the deficit will total $845 billion when the budget year ends on Sept. 30. If correct, that would be first time the government has run annual deficit below $1 trillion since 2008.
The deficit is the amount the government must borrow when its expenses exceed its revenue. Each month's deficit is volatile and can be affected by calendar quirks that shift government spending or revenue from one month to another.
The annual deficit is projected to be smaller this year because the government is collecting more revenue this year, mainly because of faster job growth and higher taxes.
At the same time, the government is spending less on some programs. That's in part because of spending cuts that were enacted under a 2011 agreement to raise the federal borrowing limit. Also, the improved economy has reduced demand for unemployment benefits and some other government programs.
Last year, the economy grew at a modest 2.2 percent and generated an average of about 180,000 jobs a month. Stronger job growth is forecast for this year - an average of more than 200,000 a month, some economists say. More jobs mean more income, which generates more tax revenue for the government.
Another factor in a smaller expected deficit is higher taxes for some Americans this year. When Congress and the White House reached a deal in January to avert the fiscal cliff, they allowed taxes to rise on individuals earning at least $400,000 a year and couples earning $450,000. That is expected to raise $620 billion in revenue over the next decade.
And the agreement allowed a 2 percentage point cut in the Social Security tax to expire, thereby raising taxes on nearly everyone who earns a paycheck. This year's higher Social Security tax is projected to raise about $10 billion more a month in revenue.
The additional revenue is likely to slow the deficit's growth for the rest of the budget year. The deficit will also likely shrink in April, when the government collects much of its income-tax revenue. Last year, the government reported a surplus of $59 billion for April. A stronger economy could make this year's April surplus even larger.