Tags: US | Budget | Deficit

US Sinks Deeper Into Red Ink as Budget Deficit Hits April Record of $82.7 Billion

Wednesday, 12 May 2010 02:53 PM

 

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The United States posted an $82.69 billion deficit in April, nearly four times the $20.91 billion shortfall registered in April 2009 and the largest on record for that month, the Treasury Department said Wednesday.

It was more than twice the $40 billion deficit that Wall Street economists surveyed by Reuters had forecast and was striking since April marks the filing deadline for individual income taxes that are the main source of government revenue.

Department officials said that in prior years, there was a surplus during April in 43 out of the past 56 years.

The government has now posted 19 consecutive monthly budget deficits, the longest string of shortfalls on record.

For the first seven months of fiscal 2010, which ends Sept. 30, the cumulative budget deficit totals $799.68 billion, down slightly from $802.3 billion in the comparable period of fiscal 2009.

Outlays during April rose to $327.96 billion from $218.75 billion in March and were up from $287.11 billion in April 2009. It was a record level of outlays for an April.

Department officials noted there were five Fridays in April this year, which helped account for higher outlays since most tax refunds are issued on that day.

But for the first seven months of the fiscal year, outlays fell to $1.99 trillion from $2.06 trillion in the comparable period of fiscal 2009, partly because of repayments by banks of bailout funds they received during the financial crisis.

Receipts in April — mostly from income taxes — were $245.27 billion, up from $153.36 billion in March but lower than the $266.21 billion taken in during April 2009.

Receipts from individuals, who faced an April 15 filing deadline for paying 2009 taxes, fell to $107.31 billion from $137.67 billion in April 2009.

The U.S. full-year deficit this year is projected at $1.5 trillion. The U.S. budget deficit hit $1.4 trillion in 2009, just shy of 10 percent of gross domestic product, when the economy was in a deep recession. The gap could be even larger this year.

White House budget director Peter Orszag told Reuters Insider in an interview on Wednesday that the United States must tackle its deficits quickly to avoid the kind of debt crisis that hit Greece.

"We want to make sure we never wind up facing the sorts of choices that Greece now faces," he said.

While the United States was in "no imminent danger" of a crisis of Greek proportions, Orszag said "I would prefer to be addressing this sooner rather than later."

A bipartisan commission of U.S. lawmakers looking for ways to tackle the U.S. budget deficit met for the first time in late April and is due to make proposals by Dec. 1.

He said U.S. politicians needed to come up with more ambitious proposals for ways to return the country's public accounts to health.

"Frankly the political system does not deal well with long-term problems until they become a crisis, and we do not want this to become a crisis," he said.

"Everyone always wants the deficit to be addressed but they're against everything you could do to address it," he said. "Proposals to cut government spending, if you then look at the specifics of what people are willing to cut, it often amounts to a lot less."

Greece's crisis worsened this year when the government revealed it was running a much higher budget deficit than thought, spurring investors to drive up Greek borrowing costs.

In exchange for emergency aid from the European Union and International Monetary Fund, Greece was forced to cut wages and other public spending sharply and raise taxes.

Concerns have grown that other European countries facing sluggish growth and rising deficits, including Spain and Portugal, may also be at risk, prompting the EU to approve a $1 trillion bailout earlier this week.

The United States also spends more than it earns in tax revenue. But global investors have remained eager buyers of U.S. Treasury debt, particularly during times of crisis.

Orszag said this buys lawmakers some time but should not encourage complacency.

"Right now, there is no imminent danger, but to try to predict exactly when that will shift is a fool's errand."

Orszag declined to address the viability of a value-added tax as a U.S. deficit-cutting measure, saying the White House wants to give the commission time to present its proposals.

But he did say that there were likely to be legislative changes soon in the way the United States taxes profits earned by venture capital and private equity managers.

© 2014 Thomson/Reuters. All rights reserved.

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