The Congressional Budget Office released a report Wednesday that said the budget deficit for fiscal year 2014 fell to $486 billion, the smallest it's been since 2008, when it was $459 billion.
But the deficit didn't shrink because the federal government spent less. Instead, it fell because tax revenues rose by 9 percent, while total government spending increased by about 1 percent.
The Congressional Budget Office says the budget deficit fell in 2014, but not because of reduced government spending. Spending rose, but tax receipts rose faster. (AP Photo/Carolyn Kaster, File)
The federal government has been subjected to a virtual spending freeze in so-called discretionary areas controlled by Congress, and the sequester pared back some budgets for the first time in decades. Still, CBO reported that overall federal spending grew by about 1 percent in 2014, to $3.5 trillion.
That's a $44 billion increase in 2014 compared to 2013.
CBO noted several reasons for this spending increase, including a $49 billion increase in spending on Medicaid and subsidies for health insurance under ObamaCare. The subsidies amounted to $13 billion of that increase.
Social Security spending also rose $37 billion, and Department of Education spending rose $19 billion, CBO said.
Those increases in spending were offset by a $30 billion drop in Defense Department spending, and a $15 billion decline in spending at the Department of Homeland Security.
While overall spending rose $44 billion, tax receipts rose $239 billion, which allowed the budget deficit to fall $195 billion.
CBO said almost half of the increase in tax receipts was due to a $114 billion bump in withholdings from workers' paychecks. A third of that increase happened because a reduction in the payroll in fiscal year 2013 was not continued in 2014. In addition, corporate income taxes rose $48 billion.
The $486 billion budget deficit is the lowest under the Obama administration. Spending on the stimulus bill made the deficit jump to $1.4 trillion in 2009, and the deficit was north of $1 trillion from 2009 to 2012. In contrast, the highest deficit under the George W. Bush administration was $459 billion.
While the deficit has fallen sharply, it's expected to rise again in the coming years. Read CBO's report here:
