Ahead of the Bell: Budget deficit
The federal budget deficit likely will top $1 trillion through the first nine months of this budget year, a slightly improvement from last year’s record pace.
Analysts surveyed by Thomson Reuters are forecasting that the June deficit will total $69.5 billion, which would push the deficit so far this budget year above $1 trillion. The Treasury Department will release the June deficit at 2 p.m. EDT Tuesday.
The June imbalance would compare to a deficit of $94.3 billion in June 2009. The Congress Budget Office is forecasting that government receipts will be up by about $36 billion this June, compared to June 2009, reflecting in part higher collections of corporate income taxes as company profits rise with a rebounding economy.
The CBO is forecasting that the government spending rose by $11 billion this June compared to a year ago. The CBO estimate reflects an expected $19 billion drop in spending to support the financial system this June compared to a year ago but a $30 billion rise in spending on other government programs.
Many private economists are forecasting that the deficit for this year will come in around $1.3 trillion, which would be the second-highest deficit on record. But it would be down slightly from last year’s all-time high of $1.4 trillion.
The Obama administration is forecasting that the deficit for the 2011 budget year, which begins Oct. 1, will remain above $1 trillion at $1.27 trillion. And the administration predicts the imbalances over the next decade will total $8.5 trillion.
The deficits have been driven higher by the lingering effects of the worst recession since the 1930s. About one-third of the higher deficits in this period are a result of a drop in government tax revenues.
The other two-thirds of the deficit increases reflect higher government spending to stabilize the financial system, stimulate the economy and cope with the impact of the downturn through increased spending for such programs as unemployment benefits and food stamps.
The tide of red ink has sparked a political backlash with surveys showing rising unhappiness among voters with the ballooning deficits.
Obama has appointed a national debt commission to report after the November midterm elections on ways that the federal deficits can be brought under control.
The heads of the panel told the National Governors Association on Sunday that everything needs to be considered including curtailing popular tax breaks, such as the home mortgage deduction.
"The debt is like a cancer," Democrat Erskine Bowles told the governors. "It is going to destroy the country from within."