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Economy in Brief

U.S. Budget Deficit Deteriorated As Expected
by Tom Moeller September 14, 2006

The August U.S. federal government budget deficit of $64.6B was double the July shortfall and deeper than August of last year. The figure compared favorably, however, to Consensus expectations for a $67.0B deficit, elevated due to calendar quirks.

The August shortfall pulled the eleven month fiscal year 2006 deficit to $304.3B, improved versus a deficit of $354.1B for the first eleven months of FY 2005.

The FY'06 budget deficit estimate of $295.8B offered last month by the Office of Management & Budget in its Mid-Session Review looks conservative. During the last several years the Gov't has run a surplus between $25B and $65B during September.

Net revenues grew 11.7% versus the first eleven months of FY'05. Individual income tax receipts (44% of total receipts) grew 12.4% as withheld taxes rose 7.9%, due to growth in employment, and non-withheld taxes surged 20.8%. Corporate income taxes (13% of total receipts) surged 29.0% as corporate profits grew. Estate & gift taxes increased by 14.2% while social insurance & retirement receipts grew 5.7%.

U.S. net outlays grew 7.6% compared with the first eleven months of FY'05. Defense spending (19% of total outlays) grew 6.0%. Medicare expenditures (12% of outlays) advanced 13.7% and social security spending (21% of outlays) rose 4.7%. Higher interest rates boosted the government's interest expense by 22.2% y/y to $212.9B so far this fiscal year.

US Government Finance   August July Y/Y FY 2005 FY 2004 FY 2003
Budget Balance -$64.6B -$33.2B -$51.3B
-$318.3B -$412.7B -$377.6B
Net Revenues $153.9B $159.8B -1.0% 14.5% 5.5% -3.8%
Net Outlays $218.5B $213.0B 5.7% 7.8% 6.2% 7.4%
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