$1.3 trillion deficit a slight improvement
The federal budget deficit fell to nearly $1.3 trillion this year - slightly lower than last year's record of $1.4 trillion - as the cost of a federal bank bailout came in much lower than expected and corporate profits rebounded sharply, congressional budget analysts said Thursday.
The budget gap for the fiscal year that ended Sept. 30 was the second-largest on record since 1945, at nearly 9 percent of gross domestic product, according to the nonpartisan Congressional Budget Office.
But it was lower than either the CBO or the White House had predicted earlier this year, suggesting that the wave of red ink propelled by the recession that began in 2007 has finally peaked.
The numbers are preliminary; the Treasury Department will release official spending and revenue figures later this month. But they offer a first glimpse at the forces shaping the nation's budget picture.
According to the CBO, revenue rose for the first time in 2010 after two years of declines, driven by a significant increase in tax collections on corporate profits.
The Treasury also received dramatically higher earnings from the Federal Reserve, which is reaping the rewards of the larger and riskier investments it made to combat the recession, the CBO said.
Meanwhile, federal spending fell slightly compared with 2009, mainly due to signficantly lower costs for the Troubled Assets Relief Program, otherwise known as the bank bailout, which ended Sunday. Payments to mortgage-insurance giants Fannie Mae and Freddie Mac also fell, as did FDIC payouts to cover deposits in troubled banks.
Excluding those programs, spending rose by about 9 percent in 2010 - "somewhat faster than in recent years," the CBO said. The increase was driven primarily by the rising cost of unemployment benefits and other programs related to last year's $814 billion economic stimulus package.
- Lori Montgomery
Dow retreats after nearing 11,000
Stocks edged lower Thursday, backing away from early gains, as uncertainty grew ahead of a key report of Friday's unemployment report from the Labor Department.
The Dow Jones industrial average came within two points of 11,000 before turning lower for most of the day. The Dow has not traded above that level since May 4, about a week after reaching its highest point of the year.
Slightly better news on claims for unemployment insurance gave stocks an early lift.