U.S. Budget Deficit $176.4B in October

Shortfall Exceeds Predictions To Set October Record; New Fiscal Year Picks Up Where Old One Left Off

(AP)  The federal deficit hit a record for October as the new budget year began where the old one ended: with the government awash in red ink.

Economists worry that if such deficits continue it could push up interest rates, further dragging on the fragile economic recovery.

The Treasury Department said Thursday that the deficit for October totaled $176.4 billion, even higher than the $150 billion imbalance that economists expected.

The deficit for the 2009 budget year, which ended on Sept. 30, set an all-time record in dollar terms of $1.42 trillion. That was $958 billion above the 2008 deficit, the previous record holder.

October was the 13th straight month to show a monthly deficit - another record. It was the fifth-largest monthly deficit ever.

The imbalance came mostly from lower receipts of individual and corporate taxes. Receipts were $135.3 billion, a 17.9 percent drop from last October.

Spending dipped 2.7 percent to $311.7 billion. Last October's outlays were inflated by the $33 billion spent on the first round of financial bailouts at the peak of the financial crisis.

The Obama administration expects this year's deficit to reach $1.5 trillion. That would make it the third straight record annual deficit.

In relation to the overall economy, the 2009 deficit was 9.9 percent of the gross domestic product. That was the highest level since the World War II-era deficit hit 21.5 percent of GDP in 1945.

The devastating effects of the country's worst recession since the 1930s and the government's efforts to stabilize the financial system with a $700 billion bank bailout fund and a $787 billion economic stimulus program drove the 2009 deficit.

The administration projects the deficit will remain above $1 trillion in 2011. In fact, according to the estimates it made in August, the deficit will never drop below $739 billion over the next decade.

So far, the government has been able to borrow to finance the soaring deficits at low rates because the recession pushed interest rates down and the Federal Reserve has worked to keep them low in an effort to stimulate a rebound.

But the concern is that government borrowing at such levels will start to push interest rates higher as the economy begins to recover, making it more expensive for businesses and consumers to borrow the money they need. Another worry is that foreigners could become spooked by the size of all the deficits and cut back on their purchases of Treasury debt.

China, the largest foreign holder of U.S. Treasury securities, has expressed concerns about the size of the U.S. deficits, prompting administration officials to issue repeated pledges that it will start to tackle the deficits as soon as the recovery is on more sustained footing.

Treasury Secretary Timothy Geithner, on a visit to Tokyo on Wednesday, told reporters that "as growth recovers and strengthens, we're going to bring our fiscal positions back to a sustainable balance."

Republicans have attacked the administration for failing to put forward what they consider a credible plan to deal with the soaring deficits. That debate is expected to intensify in coming weeks as Congress is faced with the need to raise the government's debt limit, currently at $12.1 trillion. The administration said last week it expects to hit the current limit in December.

[50BMS13]

Why did Obama campaign against pork barrel/earmarks and incurring debt, and now look. BIG MESS. He has spent more than Bush did in 8 years in his first 6 months. Crazy. Big trouble.

[briannorwood]

Here's my take on it...

The Bush administration, through laziness, lack of interest and general incompetence allowed the economy to grind to a complete halt by November, 2008.

Obama has applied necessary Keynesian economic remedies to stablize a rapidly deteriorating situation and avoid total economic collapse of the global economy.

Now, the same folks who brought us the mess are complaining about deficits with their new-found "fiscal conservatism".

When the wheels fall off the economic track, only government...and big-spending government of the kind Obama initiated can get the wheels moving again.

I agree that the huge deficits resulting are not a good thing long-term and we will have to bear some pain down the road. But, when things were as bad as I think they were, Obama had no choice.

[mbburch06]

Yeah because Bush wasn't a Keynesian?!? Get a clue. Obama is repeating Bush's mistakes on an even larger scale. Both of those idiots are cut from the same cloth, and NONE of their so-called economic "expert" advisors saw this disaster coming. What makes you think they can get us out of it?

"Only government can save us." I'm sure the establishment loves to hear people like you repeating their own propaganda. Are you really that naive?

[OldGeezer43]

Let's do away with the two parties and formed new ones that stand for something or anything. The ruin of our republican form of government has been the professional politician. Term limits might be a good start.

[Stevenapoli7]

Man, it's been all down hill since Nixon put us on fiat currency in 1971.

[PaGuy1960]

amazing isn't it. I think it time for a new party. These idiots are destroying what's left.

[vietnamwar]

WASHINGTON (Reuters) ? Not sure what to give Uncle Sam this Christmas? How about a nice, fat check to help whittle away at the $7.6 trillion national debt?

The U.S. Treasury Department accepts gifts, payable to the Bureau of the Public Debt. Just mail them to the attention of Department G, Post Office Box 2188, Parkersburg, West Virginia, 26106-2188. Make a note in the memo section that it is a gift to reduce the debt held by the public.

Yes, really.

Don't worry Mr Obama will take care of us all....share the wealth...

[Marc_1986]

We're in trouble.

[inketolstoy]

Yep. And who is going to save us? The pubs? They didn't do so four years ago. The Dems? They make the republicans look fiscally responsible for only spending a trillion more than they make by blowing through three trillion in less than a year. Conservatives claim to be fiscaly responsible. Every liberal progressive that post on this site claims to be fiscally conservative, yet both sides keep voting in people who consistently spend more and more billions than the government brings in. Medicaid is bleeding red. Social Security has begun the long ride down. Cuts need to be made, and those cuts are going to hurt. Are we willing to accept the reality of our government doing less with less?

[PaGuy1960]

exactly

[Forbus56]

The dirtiest word in the American political scene should be "incumbent." And yes, I mean yours and my incumbent representative. Vote them all out. Until we stand up and take back our government...continue to see headlines like the above.....