The U.S. government, on course to reach a record annual budget deficit, posted a monthly shortfall of $188.2 billion in March, wider than a year earlier, Treasury Department statistics showed today.
Last month’s deficit was up from a $65.4 billion gap in March 2010, when the government marked down the cost of the Troubled Asset Relief Program by $115 billion.
The White House and Congress last week reached agreement on a spending plan for the current fiscal year, which started Oct. 1, and face another fiscal hurdle next month with the prospect of reaching the statutory debt limit of more than $14 trillion. Last week’s agreement averted a shutdown of government agencies.
“It has a long way to go to zero at this rate,” said Michael Englund, chief economist at Action Economics in Boulder, Colorado. The agreement to cut $38 billion from the 2011 budget is “pocket change,” although “it’s certainly a number that breaks in the right direction.”
This year’s federal budget is projected to reach $1.5 trillion deficit, according to a Congressional Budget Office estimate released Jan. 26. The previous record, $1.4 trillion, was reached in fiscal 2009.
For the fiscal year to date, the budget deficit totaled $829.4 billion compared with $717 billion the prior fiscal year to date, according to the Treasury’s statistics.
In fiscal 2010, the government reported a budget deficit of $1.3 trillion, the second largest on record. A decade earlier, in fiscal 2000, the government reported a record budget surplus of almost $237 billion.
“The next several weeks will provide important information about receipts this year,” the Congressional Budget Office said April 7. “Final payments for 2010 individual income tax returns are due this month, and individuals and corporations alike will make quarterly estimated payments of income taxes in April.”
The median forecast of 28 economists surveyed by Bloomberg News projected a March budget deficit of $189 billion. Forecasts ranged from gaps of $60 billion to $200 billion. The non-partisan CBO, in a forecast issued April 7, estimated the March budget deficit would total $189 billion.
The Treasury’s report showed that government spending jumped 55 percent in March to $339 billion. Adjusting for the effect of the reduction in the cost of TARP taken in March 2010, outlays this year would have climbed about 1.5 percent, the Treasury said.
Revenue and other fees declined 1.5 percent to $150.9 billion.
Individual income receipts have increased 21 percent so far this fiscal year to $475.6 billion from the same period in 2010. Corporate income taxes have climbed 2.1 percent.
The drop in revenue last month in part reflects the cut in social security payroll taxes contained in the December compromise by President Barack Obama and congressional Republicans that also extended Bush-era tax cuts and renewed emergency jobless benefits.
“The payroll tax cut is keeping down budget revenues relative to last year and this is leading to wider monthly budget deficit figures this year,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “There is some hope that things are about to change now that Congress and the administration realize that something needs to be done to reign in future deficit spending.”
With the budget agreement for the current fiscal year in place, Congress must now turn to raising the statutory debt limit to avert default on the government’s debt and maintain vital services. Failing to raise the borrowing limit may disrupt financial markets and lead to higher borrowing costs for the government, businesses and consumers.
The Treasury Department estimated last week that the debt limit will be reached May 16, and that without congressional action, it will be forced to employ a variety of accounting maneuvers to prevent default. The debt limit currently stands at $14.294 trillion, and the Treasury said it can probably stave off default until early July.