Budget Deficit in U.S. Narrows 13% to $90.5 Billion on Rising Tax Receipts
The U.S. government posted a smaller budget deficit in August compared with the same month last year, helped by rising tax receipts.
The excess of spending over revenue totaled $90.5 billion last month, smaller than the median forecast of economists surveyed by Bloomberg News and down 13 percent from $103.6 billion in August 2009, according to a Treasury Department report issued today in Washington. The gap for the fiscal year that started in October was $1.26 trillion compared with $1.37 trillion last year at the same time.
The economic recovery has helped generate more tax revenue for the Treasury, even as the Congressional Budget Office forecasts the deficit this fiscal year will reach $1.34 trillion, the second-largest on record. The Obama administration faces the challenge of trying to limit the shortfall while stimulating an economy with joblessness close to 10 percent.
“We’re seeing the revenue coming back,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “The cumulative deficit for the fiscal year is a bit smaller, but still fairly wide. It doesn’t signal a lot of improvement.”
Stocks and Treasury securities climbed. The Standard & Poor’s 500 Index rose 1.1 percent to 1,121.9 at the 4 p.m. close in New York. The yield on the benchmark 10-year note, which moves inversely to prices, dropped to 2.75 percent from 2.79 percent late on Sept. 10.
Less than Forecast
The government’s budget deficit for August compares with a forecast of $95 based on the median of 35 estimates in a Bloomberg survey. Projections ranged from gaps of $120 billion to $85 billion.
The non-partisan CBO forecasts the budget deficit will amount to 9.1 percent of gross domestic product this year, only exceeded in the past 65 years by 2009’s 9.9 percent.
Government borrowing to finance the debt has picked up at the same time that American businesses and consumers have used growing profits and savings to reduce liabilities. Combined with a slowing economic recovery, that’s helped keep interest rates low. The average rate on a 30-year fixed mortgage reached 4.32 percent in the week ended Sept. 2, the lowest since Freddie Mac’s records began in 1972.
The CBO, in a report issued Sept. 8, projected a narrowing of the August budget deficit to $95 billion.
In today’s report, the Treasury said revenue and other income climbed 13 percent from the same month last year to $164 billion, second only to the same month in 2007 as the highest August on record. Corporate tax receipts increased 30 percent for the fiscal year to date to $142.4 billion. Individual income tax collections fell over the same time period to $791.2 billion.
Spending for the entire government for August climbed 2.2 percent from the same month a year earlier to $254.5 billion. Spending by the Defense Department rose to $605 billion for the fiscal year to date. Outlays by the Social Security Administration climbed to $690.5 billion. The Department of Health and Human Services, which administers the Medicare and Medicaid programs, increased its spending to $781.8 billion.
Last month, the Treasury lowered its estimate for government borrowing from July through September, reflecting a reduction in federal spending. Borrowing will total a net $350 billion in the current quarter, compared with an estimate three months earlier of $376 billion, the Treasury announced Aug. 2. It also projected borrowing of $380 billion in the three months to Dec. 31.
The Federal Reserve said the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks released last week.
The world’s largest economy grew at a 1.6 percent annual rate in the second quarter, down from a 3.7 percent pace in the first three months of the year, according to Commerce Department statistics.
In the second half of 2009, the economy began to recover from the recession that started in December 2007. So far this year, payrolls have grown by 723,000 workers compared with the 8.4 million jobs lost during the recession, indicating it will take years for employment to recover.
The economy, jobs and the budget deficit are likely to be top issues in November elections that will decide control of Congress. Heading into the campaign season, pessimism nationwide about the direction of the country is sapping the enthusiasm of Democrats and political moderates.
A national Gallup Poll completed Sept. 5 found 50 percent of Republicans “very enthusiastic” about voting this November versus 25 percent of Democrats and 28 percent of independents. Among all registered voters, Republicans tied Democrats in voting preferences for Congress, with each party attracting 46 percent support.
A Quinnipiac University poll released last week showed 56 percent of respondents disapproved of Obama’s handling of the economy while 39 percent approved. The percentage of voters who approve of Obama’s overall job performance remained unchanged from a July Quinnipiac poll, at 44 percent.