Thursday, May 13, 2010

Bloomberg: Budget Deficit in U.S. Widened to $82.7 Billion (Update1)

.
http://www.businessweek.com/news/2010-05-12/budget-deficit-in-u-s-widened-to-82-7-billion-update1-.html

Budget Deficit in U.S. Widened to $82.7 Billion (Update1)
May 12, 2010, 2:48 PM EDT
(Updates with economist’s comment in fourth paragraph.)


By Vincent Del Giudice

May 12 (Bloomberg)
-- The U.S. posted its largest April budget deficit on record as receipts declined in a month that typically sees an increase in individual income tax payments.

April marked a record 19th straight monthly shortfall, highlighting the challenges facing the Obama administration. Deterioration in the government’s balance sheet in coming years raises the risk of higher interest rates even as an improving economy helps lift tax receipts.

“With the recovery in place, we should be seeing higher revenue and lower outlays, not the other way around,” said Win Thin, senior currency strategist at Brown Brothers Harriman & Co. in New York. For the deficit as a share of gross domestic product to decline this year, “we need to see some improvement in coming months,” he said.

The government’s April budget deficit compares with a median forecast of $57.9 billion, according to a Bloomberg survey of 30 economists. Projections ranged from deficits of $20 billion to $90 billion.

The last time the U.S. had back-to-back April deficits was 1963-1964. The government has reported budget surpluses in 43 of the past 56 Aprils. For the fiscal year that began in October, the budget deficit totaled $799.7 billion compared with $802.3 billion during the same period last year.

CBO Forecast

The non-partisan Congressional Budget Office, in a report issued May 10, projected an April deficit of $85 billion. “The decline in non-withheld individual income tax receipts and the increase in individual refunds were partly offset by higher revenues from other sources,” the CBO said in the report.

Revenue and other income fell 7.9 percent to $245.3 billion in April from $266.2 billion the same month last year, the Treasury said.

Corporate tax receipts totaled $77.1 billion for the year to date, an increase of 8.9 percent. Individual income tax collections were down 11.6 percent so far this fiscal year to $500.8 billion.

Spending for the entire government for April jumped 14.2 percent from the same month a year earlier to $328 billion.

Outlays by the Social Security Administration rose to $437.7 billion for the fiscal year to date. Spending by the Department of Health and Human Services, which administers the Medicare and Medicaid programs, rose to $504 billion.

Defense Spending

Spending by the Defense Department rose to $396.5 billion. Defense Secretary Robert Gates said last week that he’s directing the military services in their fiscal 2012 budgets to cut spending on bureaucracy and infrastructure and transfer the savings to weapons and personnel accounts.

Spending on TARP, the emergency financing program organized to rescue banks and other firms, fell to $6.5 billion so far this fiscal year.

The Obama administration forecasts a $1.6 trillion budget deficit in the current fiscal year that began Oct. 1. President Barack Obama’s debt commission met April 27, the first of a series of meetings aimed at producing a plan to reduce the deficit.

Administration officials and Democrats in Congress are looking to the commission for recommendations on reducing the federal debt, which is currently projected to reach 90 percent of the economy by 2020. Interest payments are forecast to quadruple to more than $900 billion annually by that year.

Long-Term Borrowing

The Treasury is beginning to get a lift from an expanding economy as it emerges from the worst recession since the 1930s. The economy grew 3.2 percent from January through March, the third straight quarter of growth, helping the government to cut long-term borrowing for the first time since 2007.

Dealers in Treasury bills, notes and bonds anticipate the 2010 shortfall will be below the official $1.6 trillion White House forecast, and the Treasury indicated that tax revenue is increasing as the economy recovers. The U.S. last week announced plans to sell $78 billion in quarterly sales of notes and bonds, down $3 billion from three months ago.

--With assistance from Brian Faler and Tony Capaccio in Washington. Editors: Vince Golle, Carlos Torres

To contact the reporter on this story: Vincent Del Giudice in Washington at vdelgiudicebloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


.

No comments:

Post a Comment