The federal government ran a record budget deficit in November, putting Uncle Sam on track to post an all-time high annual shortfall of $1 trillion or more.
In just the first two months of the budget year that started Oct. 1, the deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, according to Treasury Department data released Wednesday. If the deficit does top $1 trillion for the current budget year, it also would be a post-World War II high when measured as a percentage of the economy.
The increased red ink stems from both lower tax revenue and increased spending that is a result of the recessionary economy. The government is receiving less in business and personal income taxes while spending more on programs such as unemployment insurance and food stamps. Elsewhere, emergency aid for the nation’s imperiled auto industry was thrown into jeopardy Wednesday as some Republicans revolted against a hard-fought deal between Democrats and the Bush White House to speed $14 billion to the ailing carmakers.
Then there’s the $700 billion bank rescue program. The Treasury report showed that the government spent $76.5 billion from the program in November and $191.5 billion over the past two months. A congressional oversight panel on Wednesday questioned whether Treasury is following a clear strategy in its use of those funds. The panel, which includes academic and labor representatives, also asked in a report whether the rescue effort has helped any homeowners avoid foreclosure.
The 37-page oversight report offers no specific conclusions, but the questions suggest sharp disagreements with Treasury Secretary Henry Paulson’s stewardship of the program and echo some of the criticism raised in a Government Accountability Office audit of the program last week.
Many Democrats in Congress have criticized Treasury for not using the funds to help homeowners. The department said Wednesday that the gap between the government’s revenue collections and what it paid out last month totaled $164.4 billion, the largest deficit ever recorded for the month of November. The deficit was $98.2 billion in November 2007.
An annual deficit of $1 trillion would equal 6.7% of the gross domestic product, the economy’s total output in a single year. That would surpass the previous postwar record in GDP terms of 6% sent in 1983 when Ronald Reagan was president. And some economists think the annual deficit will be even higher. David Rosenberg, North American economist at Merrill Lynch, projected that it could reach $1.5 trillion, depending on how large an economic stimulus package is approved next year. (Economic Times)