Budget deficit dropped to $27 billion in January

The budget deficit fell sharply in January compared to a year earlier, as signs of life in the economy lifted income tax revenue and some accounting changes also helped drive down the deficit. The budget deficit dropped to $27 billion last month, down from $50 billion in January 2011, the Treasury Department says. Most of the drop was due to several accounting changes. The biggest resulted in some benefit payments being made in December rather than January. Excluding the impact of the accounting changes, the budget gap still declined 18% last month, largely as a result of increased income tax revenue. In the first four months of the 2012 budget year, which began Oct. 1, the deficit fell by $70 billion, to $349 billion, the department says. The deficit is on track to decline this year from last year’s level of $1.3 trillion. But the Congressional Budget Office, a nonpartisan agency, forecast last week that the gap will be nearly $1.1 trillion, the fourth year in a row it will top the $1 trillion mark. Before 2009, the record budget deficit was $458 billion, under President George W. Bush. The Associated Press has the full story here. Meanwhile, the Commerce Department says the overall trade deficit widened to $48.8 billion in December because imports grew at a faster pace than exports. It was the largest imbalance since June. Read that story here.