Aug. 12 (Bloomberg) -- The U.S. budget deficit reached a record for the first 10 months of the fiscal year and broke a monthly high for July as the recession curbed revenue and the government ramped up spending to rejuvenate the economy.

The shortfall so far for the fiscal year that ends Sept. 30 totaled $1.27 trillion compared with a $389 billion year-to-date gap in 2008, the Treasury said today in Washington. The excess of spending over revenue for July climbed to $180.7 billion compared with a $102.8 billion gap in July 2008 as the government spent more than in any month in U.S. history.

Tax receipts are sliding and spending is surging even as some economists say the recession may have ended. The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts, infrastructure projects and a goal to create or save 3.5 million jobs. President Barack Obama also is pushing a health-care overhaul that may cost $1 trillion over a decade.

“Spending is bound to increase as the year goes along” and money from the stimulus package is distributed, said Stan Collender, managing director of Qorvis Communications in Washington and a former U.S. House and Senate Budget Committee analyst. “That’s good news given the state of the economy. You want to do that, to get the recovery going.”

Record Spending

Spending for the month of July rose 26 percent from a year earlier to $332.2 billion, while revenue fell 6 percent to $151.5 billion. Because Aug. 1 was on a weekend, many payments due at the start of the month were disbursed in late July, boosting outlays by about $25 billion, Treasury said.

For the fiscal year that ends Sept. 30, the Office of Management and Budget forecasts the deficit will reach a record $1.841 trillion, more than four times the previous fiscal year’s $459 billion shortfall.

Corporate tax receipts totaled $104.5 billion through July versus $246.8 billion, a decline of 58 percent, the Treasury’s budget statement said today. Individual income tax collections were down 21 percent so far this fiscal year to $750.4 billion compared with $943.9 billion in the year-earlier period.

In other categories, spending by the Social Security Administration rose to $609.3 billion from $546.8 billion for the fiscal year to date; spending by the Department of Health and Human Services, which administers the Medicare and Medicaid health programs, rose to $677.7 billion from $582.8 billion and spending by the Defense Department rose to $530.8 billion from $491.0 billion, Treasury said today.

TARP, Fannie Mae

The Treasury also said that for the fiscal year to date it has spent $169.1 billion on the financial rescue plan called the Troubled Asset Relief Program, and $153.3 billion to purchase mortgage debt from government-sponsored enterprises including Fannie Mae and Freddie Mac, now in government conservatorship.

Economists surveyed by Bloomberg News forecast a July deficit of $180 billion, according to the median of 31 estimates. Projections ranged from deficits of $115 billion to $182 billion.

Recovery from the worst recession since the 1930s has begun as Obama’s fiscal stimulus -- enacted about six months ago -- takes effect, a survey of economists indicated.

The economy will expand 2 percent or more in four straight quarters through June, the first such streak in more than four years, according to the median of 53 forecasts in the monthly Bloomberg News survey. Analysts lifted their estimate for the third quarter by 1.2 percentage points compared with July, the biggest such boost in surveys dating from May 2003.

Manufacturing, Housing

The new projections, following better-than-anticipated reports on manufacturing, employment and home construction, echo gains in investor confidence that have propelled the Standard & Poor’s 500 Stock Index to its high for the year.

The anticipated expansion in the coming year won’t be enough to prevent the unemployment rate from reaching 10 percent for the first time since 1983, the survey also showed. That will force the Federal Reserve to forego raising its benchmark interest rate until the third quarter of 2010, according to the median projection.

The Fed today said it will slow the pace of its $300 billion program to buy U.S. Treasuries and anticipates that the full amount will be purchased by the end of October. Officials also left the benchmark interest rate between zero and 0.25 percent, and said economic conditions mean the rate will stay “exceptionally low” for an “extended period.”

Job Losses

The economy has lost 6.7 million jobs since the recession started in December 2007. At the same time, gross domestic product contracted at a less-than-expected 1 percent annual rate in the second quarter, and the pace of U.S. job losses slowed more than anticipated last month.

Payrolls fell by 247,000, after a 443,000 loss in June, the Labor Department said Aug. 7 in Washington. The jobless rate unexpectedly dropped to 9.4 percent from 9.5 percent, the first decline since April 2008.

The nonpartisan Congressional Budget Office said last week that Obama’s stimulus plan has pumped $125 billion into the economy so far. The administration also has committed funds to help the automotive and banking industries, taking a major stake in automaker General Motors Co. and interests in a variety of financial firms including Bank of America Corp. and Citigroup Inc.

“We had to engage in temporary deficit spending to stimulate this economy,” Jared Bernstein, chief economic adviser to Vice President Joseph Biden, said in an interview with Bloomberg Television. Growth needs to “get back on track so that we can cut that spending and get the deficit back down as a share of the economy,” he said.

To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net.

Last Updated: August 12, 2009 17:34 EDT