WASHINGTON (MarketWatch) -- The U.S. budget deficit narrowed sharply in March, the Treasury Department reported Thursday, as tax receipts climbed and government spending fell broadly.
The government's shortfall was $37 billion, down 65% compared to the March 2013 deficit of $107 billion.
In March, the government's receipts of individual and corporate taxes were both higher. Total receipts were up 16% compared to March 2013. Spending, meanwhile, fell 14% in the month. Outlays were lower in most budget categories, including defense, education and agriculture.
Payments of just over $18 billion from government-controlled mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) to the Treasury in March also contributed to the lower deficit. Those payments are deducted from spending because of the way the government counts the funds, and aren't included in revenues.
A Treasury official said that with calendar-related adjustments, the deficit would have been more than twice as large in March. Because March 1 was on a weekend, for example, certain payments that usually would have been made in March were instead made in February.
The government's deficit has been steadily improving. With the March figures, the shortfall for the first six months of the 2014 fiscal year is $413 billion. The year-to-date deficit is down 31% from the same period a year ago.
Total receipts are up 10% for the fiscal year to date, reflecting higher individual tax collections from stronger wages and salaries, as well as increased intake of corporate taxes. Overall receipts are $1.321 trillion for the year to date.
Spending, meanwhile, has fallen 4% in fiscal 2014. To date, government outlays are $1.734 trillion.
Last year, the deficit dropped to $680 billion as the economy recovered and tax receipts grew. The shortfall was the first below $1 trillion of President Barack Obama's tenure.
For the current fiscal year, the Congressional Budget Office is predicting a shortfall of $514 billion, or 3% of gross domestic product. However, the CBO sees deficits beginning to grow after 2015, as spending increases on health care and interest on the federal debt.
In his 2015 budget proposal, released in March, Obama projected a deficit for the year of $649 billion. Republicans rejected Obama's latest proposal, however, which seeks higher taxes for deficit reduction.
Budget wars have cooled in Washington with an agreement struck late last year between House Budget Committee Chairman Paul Ryan and Senate Budget Committee Chairman Patty Murray. That deal set spending levels for fiscal 2014 and 2015.
But budget politics are helping each party deliver messages as midterm elections approach in November. On Thursday, the House passed a budget proposal authored by Ryan that would cut about $5 trillion in spending over 10 years and balance the budget by 2024. Democrats assail the Ryan plan for cutting spending on social programs and repealing Obama's signature health-care law.
The government's fiscal year begins Oct. 1 and runs through September.
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