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Economy in Brief

U.S. Budget Deficit Widens to RecordĀ in Fiscal 2008
by Carol Stone October 15, 2008

The U.S. government's budget deficit for fiscal year 2008 widened sharply to $454.8B versus a deficit during FY 2007 of $161.5B. Reversing recent trends of strengthening revenues, the deficit spread resulted from an outright decline in revenues, while outlays picked up smartly.

As a percentage of GDP the budget deficit last year totaled roughly 3.2%, a contrast to FY07's marginal 1.2%. Receipts were 17.8% of GDP, down from 18.8% and outlays rose to 21.0%.

The Government's financial data are available in Haver's USECON database, with extensive detail available in the specialized GOVFIN.

Net revenues last fiscal year fell 1.7%, reversing FY07's 6.7% increase. Both individual income taxes and corporate taxes fell, the former by 1.5% and the latter, 17.8%. The "stimulus" rebates were the main factor in the lower individual taxes, as well as weaker capital gains and less growth in wages and salaries. Corporate taxes were lowered by weakening profits. Also, during the September hurricanes, impacted companies were able to postpone their September tax installments. In contrast, various unemployment and social insurance grew 3.6%, somewhat soft, but well within recent growth ranges.

U.S. government outlays grew just 9.1% during last fiscal year, a significant pickup from 2007's 2.8% rise. Defense spending (19% of total outlays) surged by 13.2%, with both war-related and standard uses contributing. Medicare expenditures (12% of outlays) slowed to "just" a 4.1% increase after the prior 13.8% increase. Social security spending (21% of outlays) also slowed, rising 5.3% from 6.9% in FY07. Net interest payments increased 4.6% in FY08, similar to the previous 5.0%.

US Government Finance   September August Y/Y FY 2008 FY 2007 FY 2006
Budget Balance +$45.7B $-111.9B +$112.9B
-$454.8B -$162.8B -$248.2B
Net Revenues $272.4B $157.0B -4.5% -1.7% 6.7% 11.8%
Net Outlays $226.7B $268.9B 31.4% 9.1% 2.8% 7.4%
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