The Exploding Federal Deficit
Thursday, July 09, 2009 at 10:09 AM EDT
Congressional Budget Office released its latest
snapshot on the federal budget. The headlines:
- The budget deficit was $1.1 trillion during the first nine months of the
fiscal year (through June). Thatâ€™s up from $286 billion at this point
- Spending has risen 21% over last year, while tax revenues have fallen
- For the first time in more than ten years, the government ran a deficit in
June. June is a big tax-paying month, so it usually records a surplus.
The charts shows the main
drivers of the exploding deficit:
- Lower tax revenues. Revenues have fallen 18%, adding $346 billion to the
deficit. Income tax revenues have been particularly hard hit: individual income
tax payments are down 22%, and corporate income taxes are down 56%.
- New spending on TARP and the GSEs. CBO estimates that spending to date on
TARP will have a net cost to taxpayers of $147 billion. (For more details on
how CBO calculates this, see this post.) In
addition, the government has injected $83 billion into Fannie Mae and Freddie
Mac, the two housing GSEs. Together, these parts of the financial rescue have
added $230 billion to the deficit.
- More spending on other programs. Spending on other programs has increased
almost 14%, adding $276 billion to the deficit. CBO notes that spending rose
particularly sharply for Medicaid (up 23%) and unemployment insurance (up
156%). Those increases reflect recent legislation that expanded Federal
spending on both programs, as well as increased enrollment in the programs due
to the weak economy.
- Remarkably, interest payments are
actually lower. The public debt has, of course, been ballooning to finance
rising deficits and the financial rescue. But interest payments on the debt
have actually fallen, thanks to low short-term interest rates and smaller costs
for inflation-indexed bonds. As a result, interest payments have been $48
billion lower this year.
This article originally appeared on Donald Marron.