Deficit at 23-Year Low, Analysts Say

With only one month left to report in the government’s fiscal year, the budget deficit is on track to be the smallest in 23 years.

Red ink in August totaled $34.6 billion, the Treasury Department said Monday. That was a bit less than the $38 billion predicted by economists and brought the shortfall for the first 11 months of the budget year to $71.3 billion, 50% less than during the same period of fiscal 1996.

With a substantial surplus expected this month from quarterly tax payments, the government should have little trouble recording a deficit for all of fiscal 1997 at or under the $37 billion projected earlier this month by the Clinton administration, analysts said.

“We haven’t seen a slowing in the economy in the third quarter, so you have to expect revenue streams are going to do at least as well as projected or a bit better,” said economist Tim O’Neill of Harris Bank/Bank of Montreal.

If expectations are realized, the 1997 deficit would be the smallest since 1974, during the Nixon-Ford administration. And it would mark the fifth consecutive improvement since the deficit swelled to a record $290 billion in the Bush administration.

The deficit was $107.4 billion in fiscal 1996. The administration is projecting it will increase to $58.3 billion in 1998 and won’t decline below the 1997 level until 2001.

That’s because the budget package approved this summer by President Clinton and Congress put most of the tax cuts into effect before the main spending cuts.

O’Neill warned that the deficit could go even higher if the economy falters, reducing tax revenues and requiring spending increases.