Treasury Cuts Borrowing Estimate by $14 Billion

Monday, 29 Jul 2013 06:01 PM

 

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The U.S. Treasury Department said it will borrow about 6.3 percent less than it projected three months ago as a stronger economy and job growth help narrow the nation’s budget deficit.

Issuance of net marketable debt of $209 billion in the July-to-September period compared with $223 billion initially forecast on April 29, after a net paydown last quarter, the Treasury said Monday in Washington. Borrowing needs for the October-December quarter were estimated at $235 billion.

The estimates are made as part of the department’s quarterly refunding announcement set for July 31. In a statement accompanying Monday’s borrowing needs, Treasury Deputy Assistant Secretary for Macroeconomic Analysis Seth Carpenter cited an economy that’s been growing “steadily” for almost four years, a private sector that’s generated jobs for 40 straight months and a stronger housing market.

“We are beginning to see more normal trends with regard to our budget finances,” Gennadiy Goldberg, a U.S. strategist at TD Securities Inc. in New York, said before the report. “So going forward we will see a steady decline in financing needs as the budget dynamics continue to improve.”

In the April-through-June quarter, Treasury paid down $11 billion, compared with a previous estimate of a $35 billion paydown, the department said Monday. The forecasts assume a cash balance of $95 billion at the end of September and $80 billion on Dec. 31, it said.

Fiscal Improvement

The U.S. government posted the widest monthly budget surplus in more than five years in June, as spending plunged 47 percent and a stronger economy lifted tax receipts, the Treasury said July 11. The Obama administration projects the federal budget deficit will shrink to $759 billion in the year ending Sept. 30, the smallest gap in five years.

The U.S.’s Aaa credit-rating outlook was revised to stable from negative earlier this month by Moody’s Investors Service, which said the government’s debt trajectory has steadied with budget deficits narrowing. Moody’s had assigned the negative outlook in August 2011, warning that it may downgrade the U.S. for the first time on concern fiscal discipline was eroding and the economy was weakening.

Increased tax collections and rising payments to the Treasury from Fannie Mae and Freddie Mac as the housing market recovers are taking the pressure off of Congress and the White House to achieve an agreement on dealing with spending, deficits or automatic budget cuts.

Debt Debate

When members of Congress return from an August recess, they and the president will face several decisions affecting the economy, including determining federal spending levels and raising the government’s $16.7 trillion debt limit. Republican lawmakers are demanding spending cuts in exchange for raising the debt ceiling while Obama is arguing that austerity will stifle the economic recovery.

Treasury Secretary Jacob J. Lew on Sunday urged Congress to raise the debt ceiling without last-minute brinksmanship and warned Republicans that the U.S. can’t “cut its way to prosperity.”

“We need to get the debt limit extended in a way that doesn’t create a crisis,” Lew said on NBC’s “Meet the Press.” “Congress needs to do its job.”

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