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Economy in Brief

U.S. Budget Deficit Stable in August, Swelled Year-to-Date
by Tom Moeller September 11, 2008

The U.S. government's August budget deficit of $111.9B was roughly equal to the deficit of last August of $117.0B. Moreover, based on expectations formed by Public Debt Transactions from the Daily Treasury Statement, the budget surplus roughly equaled the Consensus forecast for a deficit of $105B. The Treasury Statement figures are available in Haver's DAILY database.

Like prior months, however, that is where the good news ends on the Federal budget front. For the first eleven months of FY08 the government ran a budget deficit of $483.4B which was up from the deficit of $274.4B during the first eleven months of FY07. The weak economy has limited government receipts and swelled expenditures.

For the fiscal year to date federal receipts fell 1.4% from a year earlier, the third negative comparison in a row and it compared to positive 7.5% y/y growth during the first eleven months of FY07. Higher unemployment pulled the growth in individual income tax receipts (44% of total receipts) to a negative 2.7% this year versus positive 11.5% growth during all of FY07. That was the weakest growth since a shortfall in mid-2004. Despite higher unemployment, withheld income taxes still grew 3.3%, but that was about one-third the growth of a year earlier. Growth in non-withheld taxes similarly fell to just 5.1%, also one-third of the growth during the first eleven months of FY07.

Lower corporate profitability provided a further crimp to government revenues. Corporate income taxes (13% of total receipts) fell 6.9% from receipts during the first eleven months of FY07. During FY07 they rose 8.5% during the first eleven months.

Unemployment insurance contributions fell 3.3% FYTD due to negative employment growth while Federal excise taxes fell 2.3%. Estate and gift taxes rose 11.8%.

U.S. net outlays grew 7.0% during the first eleven months of FY08, up from 5.3% growth during FY07's first eleven months. Growth in defense spending (19% of total outlays) led the acceleration with an 11.7% gain, up from 7.0% growth one year earlier. Transportation spending grew 6.2%, up from 4.2% growth in FY07's first eleven months.

As unemployment rose, growth in outlays for income security (15% of outlays) surged to 17.7% from 5.7% one year earlier. Medicare expenditures (12% of outlays) grew a slower 4.4% but health spending (10% of total outlays) was near-constant at a 4.8% growth rate. Growth in interest expense also held steady at 4.5%.

The Government's financial data is available in Haver's USECON database.

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

US Government Finance   August July Y/Y FY 2007 FY 2006 FY 2005  
Budget Balance $-111.9B $-102.8B $-117.0B (8/07) -$162.0B -$248.2B -$318.7B
Net Revenues $157.0 $160.5B -5.7% 6.7% 11.8% 14.1%
Net Outlays $268.9 $263.3B -5.1% 2.8% 7.4% 7.6%
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