Thanks to increased tax revenues, the budget deficit will shrink to $642 billion this year, or 4 percent of GDP. That’s the lowest aggregate deficit since 2008 and less than half the size of 2009′s deficit, which was 10.1 percent of GDP.
The pace of the improvement is what’s most interesting. Since February, the CBO has knocked $200 billion off its deficit projection for this year, and $618 billion off its cumulative estimate for the next 10 years. All in three months. This is largely due to higher than expected tax revenues. Individual income tax receipts jumped by $69 billion, or 5 percent. Corporate tax receipts are now expected to be $40 billion higher, a 16 percent increase. Thanks to lower defaults, Fannie Mae also kicked in an extra $95 billion to the Treasury.