US budget deficit explodes in May as income falls and Medicare spending rises

(Reuters) – The U.S. budget deficit ballooned in May from a year earlier as revenues fell and Medicare spending rose, the Treasury Department said on Monday in its first monthly review of government finances. since an agreement was reached to suspend the debt ceiling and avoid a first-ever federal default.

May’s deficit jumped to $240 billion from $66 billion a year earlier, more than offsetting the $176 billion surplus recorded in April. The median forecast of economists polled by Reuters was for a deficit of $236 billion.

May revenue totaled $307 billion, down 21% from $389 billion a year earlier, with lower personal income taxes not withheld and higher tax return payments accounting for most of the shortfall.

In 2022, more unwithheld tax payments were processed in May, in part due to Internal Revenue Service staffing issues, and capital gains taxes associated with the 2021 tax year were more important a year ago at this time.

Spending rose 20% to $548 billion, with tripling spending on the state health care program Medicare for the elderly driving much of the increase.

In the first eight months of the fiscal year, which began in October, the Treasury reported a cumulative deficit of $1.165 trillion, up from $426 billion a year earlier.

On June 3, President Joe Biden signed legislation suspending the $31.4 trillion cap on US debt through January 2025, after reaching a deal with congressional Republicans with just two days to spare before the government does not run out of funding to cover all its bills.

Since then, the Treasury has announced its intention to rebuild its depleted cash position, which had fallen to less than $23 billion at the start of the month and reached around $88 billion last Thursday.

(Reporting by Dan Burns; Editing by Paul Simao)

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