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Economy in Brief

U.S. 'YTD Budget Deficit Broaches $1 Trillion
by Tom Moeller July 14, 2009

The U.S. government ran a budget deficit of $94.3 billion last month pulling the deficit during the first nine months of this fiscal year to $1.1 trillion. That compares to a deficit of $286 billion during the first nine months of last year when the 2008 deficit totaled $454.8 billion. Year-to-date the budget deficit is running at roughly 7.7% of GDP. The Congressional Budget Office's recent deficit estimate of $1.7 trillion for FY09 amounts to 11.9% of GDP.· Net revenues during the first nine months of FY09 were down 17.9% y/y. Individual income tax receipts fell 21.9% y/y through June reflecting higher unemployment. Corporate tax receipts mirror the drying up of profitability and fell by more than one-half. Employment taxes fell for the first time since 2003 and were down by 0.2% and unemployment insurance tax receipts fell 6.2%. Estate & gift taxes fell 17.4% after 13.6% growth last year.

Swelled by TARP, U.S. government outlays surged by 20.5% from last fiscal year's first nine months. Outlays under the Government's Troubled Asset Relief Program (TARP) amounted to a much-reduced $11.3B last month but for the first nine months of the program totaled $318.8B. The U.S. Treasury has adopted the view that these TARP expenditures should be counted like any other spending. When the banks repay the Treasury, these funds will be counted as revenue. Accounted for in this way, TARP causes a surge in the budget deficit when the funds are distributed to the banks, but leads to a smaller deficit, or perhaps a surplus, when repayments are received.

Defense spending (19% of total outlays) rose 16.2% fiscal year-to-date. Medicare expenditures (12% of outlays) nearly doubled and "income security" spending (11% of outlays) jumped 20.6% after 7.5% growth last year. Social security payments rose an elevated 9.1% but net interest payments continued to fall by nearly one-third with lower interest rates.

The Government's financial data are available in Haver's USECON database, with extensive detail available in the specialized GOVFINThe Economic Crisis and the Fiscal Crisis: 2009 and Beyond from Alan J. Auerbach, University of California, Berkeley, and William G. Gale, Brookings Institution, is available here.

US Government Finance   June May Y/Y FY 2008 FY 2007 FY 2006
Budget Balance -94.3B $-189.7B $33.5B
-$454.8B -$161.5B -$248.2B
Net Revenues $215.4B $17.2B -17.1% -1.7% 6.7% 11.8%
Net Outlays $309.7B $306.9B 36.8% 9.1% 2.8% 7.4%
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