U.S. May budget deficit less than half prior year’s

WASHINGTON (Reuters) – The U.S. budget deficit fell by more than half in May from year-earlier levels to $57.64 billion as tax revenues continued to rise, the Treasury Department reported on Friday.

The monthly deficit was far below the $140 billion gap that economists surveyed by Reuters had forecast, and was down from $135.93 billion in May 2010.

During the first eight months of fiscal 2011, which ends Sept. 30, the cumulative deficit reached $927.44 billion. That is down from $935.61 billion in the comparable period in fiscal 2010.

Government spending during May declined to $232.55 billion from $282.72 billion a year earlier. The spending figure was helped by a one-time adjustment made by Treasury in the estimated cost the government will incur for the Troubled Asset Relief Program — the $700 billion program to bail out banks and automakers — which had the effect of lowering monthly outlays by $45 billion.

As banks and others that received bailouts during the 2007-2009 financial crisis repay the money, the government has been steadily ratcheting down its estimates of how much taxpayers will eventually be left to swallow from TARP.

Receipts during May — primarily from taxes and mostly on individuals — rose 19 percent to $174.91 billion from $146.79 billion in May 2010.

The United States hit its legally set $14.3 trillion debt ceiling in mid-May, forcing Treasury to juggle funds while the Obama administration and Republican lawmakers feud about raising the borrowing limit.

Treasury warns it will run out of wiggle room to keep borrowing on Aug. 2, putting the country at risk of a historic default on U.S. debt if Congress has not acted by then. (Reporting by Glenn Somerville; Editing by Leslie Adler)