by Calculated Risk on 5/08/2013 09:15:00 PM

Earlier I mentioned the improvement in the California budget (a sign that the drag from state and local governments is ending). Of course the Federal budget deficit is falling quickly. Here is the CBO's monthly budget review:

The federal government ran a budget deficit of $489 billion in the first seven months of fiscal year 2013 (that is, from October 2012 through April 2013), according to CBO’s estimates. That amount is $231 billion less than the shortfall recorded during the same period last year, primarily because revenue collections have been much greater than they were at this point in 2012. In contrast, federal spending so far this year has been slightly lower than what it was last year at this time.

I'd argue we should have - and still could spend more to address unemployment.

My view is the deficit is currently falling too quickly and slowing the economy, but that view doesn't seem to be getting any traction among policymakers. At the least there is no reason for further fiscal tightening over the next couple of years - the deficit is already falling fast (there are still longer term issues).

Thursday economic releases:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 335 thousand from 324 thousand last week.

• At 10:00 AM, Monthly Wholesale Trade: Sales and Inventories for March. The consensus is for a 0.4% increase in inventories.