WASHINGTON -- The U.S. government's budget deficit shrank to just $37 billion in March from $107 billion in the same month last year, the latest sign of improvement in the nation's finances. The deficit was the lowest for the month of March in 14 years.
The deficit fell partly because revenue jumped 16 percent to $216 billion, the Treasury Department said in its monthly budget report Thursday. Individual income and Social Security tax receipts have increased as employers have steadily hired more workers in the past year.
Changes in the timing of about $40 billion in benefit payments and tax receipts were also a big reason for the smaller deficit. Most of that change involved benefit payments that were made in February this year but had occurred in March last year.
Excluding the impact of those timing shifts, the deficit would have been $77 billion last month. Spending still slipped 2 percent in March, even excluding the timing shift.
Defense spending fell 16 percent to $45 billion last month, and spending on unemployment benefits also fell.
Corporate profits have also perked up from last year, boosting corporate tax receipts 7 percent in March, to $36 billion.
The government's 2014 budget year began Oct. 1 and is now half over. In the first six months of the budget year, the deficit was $413 billion, down from $600 billion in the first half of last year.
Tax receipts rose 10 percent in the October-March period, the Treasury Department says,
while spending fell 4 percent.
President Barack Obama projected last month that the deficit for the full year will drop to $649 billion, down from $680 billion in the previous year.
The nonpartisan Congressional Budget Office is forecasting an even bigger improvement, projecting that this year's deficit will decline to $514 billion and fall further to $478 billion next year.
That would be less than half the $1 trillion-plus deficits that existed for the first four years of Obama's presidency. The deficit rose to a record level of $1.4 trillion in 2009.
But even so, the budget gap remains historically high. And the CBO sees the deficits starting to rise after next year, driven higher by greater spending on Social Security and Medicare as baby boomers retire.
The higher deficits have sparked budget wars between Democrats and Republicans in Washington for the past three years, causing two government shutdowns. But those fights may subside this year following an agreement reached last December on the broad outlines for spending for this year and next.
"Your daily habits and routines are the reason you got into this mess," writes Trent Hamm, founder of TheSimpleDollar.com. "Spend some time thinking about how you spend money each day, each week and each month." Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Ask yourself: What can I change without sacrificing my lifestyle too much?
Remove all credit cards from your wallet and leave them at home when you go shopping, advises WiseBread contributor Sabah Karimi. “Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control,” she writes.
If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don't need. So clear that information. "If you’re paying for a recurring service, use a debit card issued from a major credit card service linked to your checking account," Hamm writes.
Reward yourself when you reach debt payoff goals. "The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated," Bakke writes. Just make sure to reward yourself within reason. For example, instead of a weeklong vacation, plan a weekend camping trip. "If you aim to reduce your credit card debt from $10,000 to $5,000 in two months," Bakke writes, "give yourself more than a pat on the back."
“Establish a budget,” writes Money Crashers contributor David Bakke. “If you don't scale back your spending, you'll dig yourself into a deeper hole." You can use personal finance tools like Mint.com, or make your own Excel spreadsheet that includes your monthly income and expenses. Then scrutinize those budget categories to see where you can cut costs.
Sort your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. "By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards," writes Mint.com spokeswoman Hitha Prabhakar.
To make a dent in your debt, you need to pay more than the minimum balance on your credit card statements each month. "Paying the minimum -– usually 2 to 3 percent of the outstanding balance -– only prolongs a debt payoff strategy," Prabhakar writes. "Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments." Or if your minimum payment is $100, try doubling it and paying off $200 or more.
If you have a high-interest card with a balance that you’re confident you can pay off in a few months, Hamm recommends moving the debt to a card that offers a zero-interest balance transfer. "You’ll need to pay off the debt before the balance transfer expires, or else you’re often hit with a much higher interest rate," he warns. "If you do it carefully, you can save hundreds on interest this way."
Have any birthday gifts or old wedding presents collecting dust in your closet? Look for items you can sell on eBay or Craigslist. "Do some research to make sure you list these items at a fair and reasonable price," Karimi writes. “Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible." Any profits from sales should go toward your debt.
If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. "Avoid the temptation to spend that bonus on a vacation or other luxury purchase," Karimi writes. It’s more important to fix your financial situation than own the latest designer bag.
Budget deficits never fall under Republican presidents. Clinton increase taxes on the 1% which helped to pay down the deficit and now Obama has raised taxes on the 1% and the deficit is going down.
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