Federal government runs record budget deficit for April as government revenue fall

Federal budget deficit hits April record

WASHINGTON — The federal budget deficit hit an all-time high for April as the government kept spending to aid the recovery while revenue fell sharply.

The Treasury Department said Wednesday the April deficit soared to $82.7 billion. That was significantly higher than last year’s April deficit of $20 billion and the largest imbalance for that month on record.

The government normally runs surpluses in April as millions of taxpayers file their income tax returns. However, income tax payments were down this April, reflecting the impact of the recession which has pushed millions of people out of work.

Total revenues for April were down 7.9 percent from a year ago.

The Obama administration forecast in February that the deficit for this year will hit an all-time high of $1.56 trillion, surpassing the current record $1.4 trillion set last year. Many private economists believe this year’s imbalance will be closer to last year’s figure and that deficits will remain high for years to come.

The trillion-dollar-plus deficits are being driven by the impact of the recession, which has cut government tax revenue while driving up spending.

April’s record deficit was a little misleading because about a third of the increase was the result of federal benefits for May that were paid on the last day in April, analysts note. That was because May 1 fell on a Saturday.

“Despite the larger-than-expected deficit (for April) we believe the overall budget picture is improving along with the strengthening economy,” economists at Nomura Global Economics said in a research note.

Analysts estimate that roughly one-third of the increase in the deficits over the past two years came from lost revenue — the result of fewer people working and lower corporate profits. The other two-thirds is from added government spending to stem the recession and aid the recovery. That includes the $787 billion stimulus bill and the $700 billion financial bailout.

Record deficits have become a political liability for lawmakers in Washington. Many voters have expressed anger over the staggering sums of the bailout and stimulus program. Two incumbents, Sen. Bob Bennett, R-Utah, and Rep. Alan Mollohan, D-W.Va., have lost primary contests in the past week, a reflection of the wave of voter unrest.

Soaring deficits have also become a political challenge for the Obama administration. The administration is promising to aggressively attack the budget deficits once the economy is stable and unemployment falls. The president has appointed a commission that is scheduled to produce a report by year’s end on what spending cuts or higher taxes, or both, are needed to control future deficits.

The back-to-back deficits in April marked the first time that has occurred since deficits were recorded in April of 1963 and 1964, according to monthly budget records that go back to 1954. During that period, the government has run April surpluses in 43 of 56 years.

Through the first seven months of the current budget year, which began on Oct. 1, the deficit totals nearly $800 billion. That is down only slightly from last year’s deficit during the same period of $802 billion.

Revenues total $1.2 trillion in those seven months, down 4.5 percent from the same period last year. Outlays total $2 trillion, a drop of 3.9 percent from the same period a year ago. That decline reflected in part less spending on the financial bailout program as many banks are now paying back the support they received at the height of the financial crisis in the fall of 2008.

At the moment, the administration is projecting that next year’s budget deficit will remain above $1 trillion for a third straight year and will never fall below $706 billion for any year over the next decade. That means the government would pile up an additional $8.5 trillion in debt over that period that will have to be financed.

So far the government has been able to pay low interest rates on the borrowing because foreign investors still see U.S. Treasury securities as a haven in times of turmoil. That was apparent last week when global markets were hit by fears over an expanding debt crisis in Europe.

Officials in China, the largest foreign holder of U.S. debt, have said it will be important for the administration to put together a credible plan for getting control of future deficits.

(This version CORRECTS that government also ran back-to-back April deficits in 1963 and 1964)