July Budget Deficit Grows By $181 Billion, YTD Individual And Corporate Receipts Tumble
The Congressional Budget Office released its preliminary July 2009 budget numbers - the budget deficit is now expected to be $181 billion, an 80% increase compared to the July 2008 deficit of $101 billion.
The deficit would have been larger had a calendar shift not been incorporated. On the receipt side:
Receipts were about $8 billion (or 5 percent) lower in July 2009 than they were in July 2008, marking the 15th consecutive month in which receipts were lower than those in the same month of the previous year. Withholding for income and payroll taxes was about $11 billion (or 8 percent) less than that in July 2008, CBO estimates; about half of that decline resulted from provisions in ARRA, primarily the Making Work Pay tax credit. The decline would have been larger if not for the effects of the calendar (July had one additional business day this year). Refunds in that month were about $11 billion less than they were in July 2008, primarily because of the rebates paid in July of last year pursuant to the Economic Stimulus Act of 2008. Lower refunds partly offset the decline in other receipts. Corporate income tax receipts continue to show weakness, with a decline of about $7 billion from July 2008.
Outlays paint a grim picture as well:
Outlays were $71 billion higher this July than in the same month last year because of growth in spending and the effects of the calendar. August 1, 2009, fell on a weekend, which shifted about $24 billion in outlays from August to July. Without that timing shift, the growth in outlays this July would have totaled $46 billion (or about 18 percent). TARP spending of $22 billion was the largest contributing factor to that increase. In addition, unemployment benefits and Medicaid outlays rose by $8 billion and $5 billion, respectively, boosted by stimulus spending from ARRA. Adjusted for timing shifts, Medicare and Social Security outlays increased by $6 billion and $5 billion, respectively, compared with last July.
YTD results demonstrate the troubling trends of declining receipts and increasing outalys persists:
CBO estimates that the federal government incurred a deficit of $1.3 trillion in the first 10 months of fiscal year 2009. Outlays were $526 billion greater than those in the October-July period last year, while revenues have fallen by $353 billion.
In the absence of a vibrant economy (and no, no green shoots anywhere on the budgetary horizon that can boost the S&P by a point here or there), the increasing deficit will receive funding only from one place: increasing Treasury auctions: $75 billion this week, and much more as the year progresses.
Full CBO report here: