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Economy in Brief

U.S. Budget Deficit Surges As Revenues Collapse & Spending Jumps
by Tom Moeller February 11, 2009

The U.S. government's January budget deficit continued to reflect the combined effects of a U.S. recession and two wars.The monthly deficit rose to $83.8 billion. Like December's figure, however, the relatively moderate deficit compares to a usual budget surplus for the month. For the first four months of this fiscal year the government's budget deficit totaled $569.0 billion. That compares to a deficit of $89.0 billion during last fiscal year's first four months. Consensus projections were for a January deficit of $79.0B.

Many forecasts for the budget deficit during all of this fiscal year are near $700B. If realized, that would swell the deficit to about 5% of GDP following last year's roughly 3.2% and FY07's marginal 1.2%. The Congressional Budget Office's recent deficit estimate of $1.2 trillion amounts to 8.3% of GDP. It assumes that revenues will fall 6.6% year-to-year and that outlays will increase 19.0%.

Adjusted for cyclicality, the CBO's latest "standardized" budget deficit estimate totaled 0.9% of GDP for 2009. The estimate was made in December.

Net revenues during January fell 11.4% from last year and for the first four months of FY09 they were down 10.2%. Individual income tax receipts reflected lower employment levels and fell 7.7% year-to-year. Corporate tax receipts were hit even harder and they fell by more than one-third. Growth in unemployment and social insurance taxes grew just 1.0%, the least since late 2003.

U.S. government outlays surged by forty-one percent from last fiscal year's first four months. Defense spending (19% of total outlays) rose 8.9%. The gain does not reflect the full cost of the resources devoted to Iraq & Afghanistan since much of the spending would have occurred anyway. Medicare expenditures (12% of outlays) jumped by 22.4% and "income security" spending (11% of outlays) jumped 25.7% after 7.5% growth last year. Social security payments rose 6.4% but net interest payments fell by more than one-quarter with lower interest rates.

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

The Congressional Budget Office's Summary of Estimated Cost of H.R. 1, The American Recovery and Reinvestment Act of 2009 as Passed by the Senate on February 10, 2009 can be found here.

US Government Finance   January December Y/Y FY 2008 FY 2007 FY 2006
Budget Balance -$83.8B $-83.6B $17.8B
-$454.8B -$161.5B -$248.2B
Net Revenues $226.1B $237.8B -11.4% -1.7% 6.7% 11.8%
Net Outlays $309.9B $321.4B 30.6% 9.1% 2.8% 7.4%
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