Budget Deficit in U.S. Narrowed to $80 Billion in December
Wednesday, January 12, 2011; 2:20 PM
The gap shrank to $80 billion, matching the median forecast of economists surveyed by Bloomberg News, from a $91.4 billion shortfall in December 2009, data from the Treasury Department released today in Washington showed.
Economists at Goldman Sachs Group Inc. in New York are among those projecting the deficit this fiscal year will match 2010's record $1.3 trillion gap after Congress last month passed legislation extending Bush-era tax cuts, reducing payroll taxes and renewing emergency jobless benefits. Republicans, who took control of the House of Representatives in last year's election, have vowed to reduce the gap by cutting spending.
"The outlook for the budget continues to be a challenge despite the change of leadership in the House," Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. "Lawmakers will need to take out the axe."
The median forecast was based on a Bloomberg survey of 30 economists. Estimates ranged from $65 billion to $95 billion. The nonpartisan Congressional Budget Office, in a forecast issued Jan. 7, also projected an $80 billion shortfall.
The Treasury's report showed receipts climbed 8.2 percent in December from the same month last year to $236.9 billion. Revenue from individual income taxes rose 22 percent to $120.3 billion last month and corporate income tax receipts rose 7.1 percent.
Government spending increased 2.1 percent in December to $316.9 billion.
The extension of tax cuts for the highest-income Americans for just two years will cost about $81.5 billion, according to a report last month from the Joint Committee on Taxation. Under current law, the tax cuts expire in 2012, and House Republicans have pledged to make them permanent.
The government must act soon to avert a crisis, said Douglas Elmendorf, director of the CBO. The changes "need to be large, need to affect programs that are popular and tax payments that people make, and it will need to be enacted fairly soon," Elmendorf said on Jan. 9
In testimony before the Senate Budget Committee on Jan. 7, Federal Reserve Chairman Ben S. Bernanke said steps to address the budget deficit could help the economy.
"The prompt adoption of a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence," Bernanke said.
For the year to date, Defense Department spending was up 6.5 percent in December. Spending by the Social Security Administration fell 10 percent, and spending by the Department of Health and Human Services, which administers the Medicare and Medicaid programs, rose 7.1 percent, according to the Treasury's statistics.