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Economy in Brief

U.S. FY '09 Federal Budget Deficit Tops $1.4 Trillion
by Tom Moeller October 19, 2009

The U.S. government ran a budget deficit of $1.417 trillion during Fiscal Year 2009. The figure was by far a record and more than tripled the 2008 deficit of $454.8 billion. While somewhat below the Congressional Budget Office's recent estimate for a deficit of $1.7 trillion, it nevertheless reached roughly 10% of GDP, the largest since 1945.

The recession in the U.S. economy drove the deficit higher last year as revenues lagged sharply and spending increased. Net revenues during FY09 were down 16.6% from FY08. Individual income tax receipts fell 20.1% reflecting higher unemployment while corporate tax receipts fell by more than one-half as profits dried up. Social security contributions fell for the first time since 1995 and estate & gift taxes fell 18.6% after 10.8% growth last fiscal year.

The wars in Iraq & Afghanistan and the U.S. recession boosted overall Federal spending by 18.2% versus FY08, double last year's growth. Defense spending (19% of total outlays) rose 7.1% during FY09. Though outlays for military personnel rose just 6.1% last year after 8.9% growth during FY08, Army procurement jumped 15.8% after 36.9% growth during '08. On the home front, growth in Medicare expenditures (12% of outlays) doubled and "income security" spending (11% of outlays) jumped by one-quarter with higher unemployment. Social security payments rose an elevated 10.7% but net interest payments continued to fall sharply with lower interest rates.

Net outlays under the Government's Troubled Asset Relief Program (TARP) started to fall by the end of FY09 but, for the fiscal year as a whole, they amounted to $333.3B. 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.

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

The Office of Management & Budget's 2010 Budget can be found here.

The Budget & Economic Outlook: An Update from the Congressional Budget Office can be found here.

US Government Finance   FY 2009 FY 2008 FY 2007 FY 2006
Budget Balance -$1,417.1B -$454.8B -$161.5B -$248.197B
   as a percent of GDP -10.0% -3.2% -1.2% -1.9%
   Net Revenues (Y/Y % Change) -16.6% -1.7% 6.7% 11.8%
     Individual Income Taxes -20.1 -1.5 11.5 12.6
     Corporate Income Taxes -54.6 -17.8 4.6 27.2
     Social Insurance Taxes -1.0 3.5 3.8 5.5
   Net Outlays (Y/Y % Change) 18.2 9.1 2.8 7.4
     Nat'l Defense 7.6 11.8 4.1 6.9
     Health 19.1 5.4 5.5 0.8
     Medicare 10.1 4.1 13.8 10.5
     Income Security 24.9 16.8 3.5 2.3
     Social Security 10.7 5.3 6.9 4.8
     Interest -24.5 6.3 5.0 23.2
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