WASHINGTON – The US federal deficit was pegged at $319 billion for the budget year that just ended marking the fact that the deficit has come down after last year’s record deficit. However, the impact of Hurricanes Katrina and Rita is likely to send it soaring once again.
Last year the deficit stood at $413 billion and has improved this year due to the robust economy as well as a surge in federal revenues. US Treasury Secretary John Snow was pleased with the latest figures admitting that the fall was better than expected and was encouraging news for the administration. “While deficits are never welcome, the fact that we finished fiscal year 2005 with a much-lower-than-expected deficit is encouraging news,” said Mr. Snow.
“Lower taxes and pro-growth economic policies have created millions of jobs and a growing economy that has swelled tax revenues over the past year.” However, it must be pointed out that only $4 billion of the $62 billion allocated towards the Katrina relief effort has been spent in the last fiscal year meaning that the rebuilding process is likely to eat into a chunk of this years’ budget. Snow acknowledged this fact, but said that the impact would be minimal, “While the effects of Hurricanes Katrina and Rita will be felt in the short term, we remain on a path to meet the president’s goal of cutting the deficit in half by 2009.”
However, in spite of this improvement over last year’s budget, this shortfall was the third highest ever recorded in history. The economy has continued to enjoy growth of over 3 percent over the last nine quarters. The effects of the hurricanes could peg it back by 0.5 percent over the next year.