US January Deficit Drops Sharply as Receipts Grow, Tax Refunds Fall

• The U.S. federal budget deficit fell sharply in January to $22Bn as receipts hit a record for that month, partly because tax refunds fell after the Internal Revenue Service (IRS) cleared a backlog of pandemic-delayed tax returns, the Treasury Department said on Monday.
• Last month's deficit was $17Bn, or 43%, less than the $39Bn deficit in January 2023. Outlays for the month grew 3% to $499Bn, while receipts jumped 7% to $477Bn.
• This January's comparison with a year ago was also significantly helped by the $36Bn bailout of a Teamsters Union pension fund in January 2023, as no similar large one-time outlays were recorded this year. For the first four months of the fiscal year, the deficit rose $72Bn, or 16%, to $532Bn as costs to service the national debt rose, as did outlays for Social Security, Medicare, and military programs.
• Individual tax refunds, which are deducted from receipts, were $15Bn lower in January than during January 2023. The IRS last year adopted new scanning technology to enable it to process paper returns more quickly. Individual withheld receipts in January, benefiting from strong employment trends, were up $20Bn, or 7%, from a year earlier.
• The Treasury's interest cost on the public debt grew $18Bn, or 35%, in January compared to a year earlier due to a higher weighted average interest rate now at 3.15%, as well as higher debt levels. For the fiscal year to date, debt interest costs were up $96Bn, or 37%, to $357Bn, outpacing outlays for Medicare.
• The Treasury also reported higher costs for military programs due to expenditures for military personnel operations and maintenance. For the first four months of fiscal 2024, these were up $32Bn, or 13%, to $283Bn.

(Source: Reuters)