U.S. Government Budget Deficit Soaring

Based on monthly reports from the Treasury Department U.S. government outlays have been exceeding total government receipts since the beginning of the Fiscal 2009 period starting October 2008 through the most recent month of May 2009. Federal receipts from income taxes, social security and other sources are running 18% lower than the same period for Fiscal 2008. Our current high unemployment is contributing to the loss of tax revenue. Government spending or outlays for this same period are running 20% higher than Fiscal 2008 resulting in a projected deficit in Fiscal 2009 in excess of 1.5 trillion dollars or almost 1.0 trillion dollars more than the deficit of almost 0.5 trillion dollars in Fiscal 2008. The 1.5 trillion deficit is my estimate based a projection of the remaining 4 months using trend extrapolation. The Government’s estimate is in excess of 1.8 trillion dollars based on Budget estimates released by the Office of Management and Budget on May 7, 2009.

No matter what number you use, the red ink is flowing and the deficit is at least 1.0 trillion dollars more then Fiscal 2008 deficit or more than 50% of the total 2008 outlays. This growing gap between government spending and income at a time when tax revenues are likely to decline further is troubling.  The Treasury routinely sells billions of dollars worth of debt paper to fund the federal budget deficit. It is expected that almost $2 trillion worth of new debt will be issued this year. This has implications for higher interest rates which will hinder recovery in the housing industry. I will continue to track these numbers on a monthly basis and keep you informed.