Economy Alarm: Federal Deficit Hits All-Time High Again in October

Federal Deficit Hits All-Time High Again in October

Government’s Failed Efforts to Stabilize Financial System Drives Record Breaking Deficit in 2009

Obama Promised He Was On Track to Improve the Federal Debt, Revive the Economy, and Save Millions of Jobs

“Obama focused on the $787 billion stimulus plan, an ambitious package of federal spending and tax cuts designed to revive the economy and save millions of jobs…. The stimulus package was a huge victory for Obama less than one month into his presidency. Still, he declared, ‘We have begun the essential work of keeping the American dream alive in our time.’… The only thing certain is that Obama is on track to boost a federal debt that stands at $10.7 trillion. Clearly mindful of that, Obama said: ‘We will need to do everything in the short term to get our economy moving again’ as well as ‘begin restoring fiscal discipline and taming our exploding deficits over the long term.’” (The Associated Press, “Obama: Stimulus lets Americans claim destiny,” 02/17/2009)

Credibility Crash: Federal Deficit Hits Record-Breaking High in October, Further Dragging on the Fragile Economic Recovery

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. (Martin Crutsinger and Daniel Wagner, “Federal Defecit Sets October Record of $176.4B,” The Associated Press, 11/12/09)
To read the full story, click here.

###