Business your connection to The Boston Globe

US budget gap shrinks in 1st half of fiscal '07

WASHINGTON -- The federal budget deficit is running at a lower rate through the first six months of this budget year even though spending in March hit a record high.

The Treasury Department, in its monthly budget statement, said yesterday the deficit from October through March totaled $258.4 billion, down 14.7 percent from the same period a year ago.

The improvement came even though the deficit for March shot up to $96.3 billion, 12.9 percent higher than the imbalance in March 2006.

Government spending for March soared to $262.76 billion, the highest total for any month on record.

The big jump reflected in part timing issues with military aid payments to Egypt and Israel, which are normally made in December.

For the first six months of the budget year, revenues were up 8.1 percent to $1.129 trillion.

Government spending is also up but at a slower rate of 2.8 percent, climbing to $1.379 trillion.

The Bush administration is forecasting that the deficit for all of the 2007 budget year, which began last Oct. 1, will total $244 billion, a slight improvement from the $248.2 billion actual deficit in 2006. However, the Congressional Budget Office is more optimistic, forecasting that the deficit for the current budget year should decline to $214 billion.

But analysts said the improvement this year was likely to be short-lived as tax revenue growth slows and spending begins to rise to deal with increased Social Security and Medicare payments when the 78 million baby boomers start to retire.