June Budget Deficit in U.S. Narrowed to $68.4 Billion

July 13 (Bloomberg)--The U.S. government posted a smaller budget deficit in June compared with the same month last year as the economic recovery brought in more tax revenue. The excess of spending over receipts fell to $68.4 billion last month from $94.3 billion in June 2009, according to a Treasury Department report issued today in Washington. It was the 21st consecutive shortfall. For the fiscal year to date, the budget deficit totaled $1 trillion compared with $1.42 trillion during the prior year to date.

Even as the economy recovers from the deepest recession since the 1930s, the budget deficit is forecast to reach a record $1.6 trillion this fiscal year as the government funds efforts to revive growth and employment. The mounting shortfalls underscore the challenge facing the Obama administration. “Tax receipts are growing at a pretty good rate,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. “We’re getting a lot of traction in the non-financial sector. It’s pretty powerful.” Year to date, the gap amounted to 9.2 percent of gross domestic product, down from 10.2 percent for the same period in 2009. The government’s June budget deficit compares with the $69 billion economists anticipated, based on the median of 35 estimates in a Bloomberg News survey. Projections ranged from deficits of $62 billion to $103.9 billion.

CBO Estimate

A report from the Commerce Department today showed the U.S. trade gap unexpectedly widened in May to the highest level in 18 months as a gain in imports outpaced an increase in shipments abroad. The gap expanded 4.8 percent to $42.3 billion as U.S. companies imported more capital equipment, automobiles and consumer goods. The budget figures were in line the estimate issued by the non-partisan Congressional Budget Office issued July 8, which projected a narrowing to $69 billion. “Because Memorial Day fell on the last day of May this year, some receipts were shifted from May into June,” the CBO said. The increase in revenue reflected a gain in corporate taxes. Receipts and other income climbed 17 percent to $251 billion in June from the same month last year, according to the Treasury.

Corporate Taxes

Corporate tax receipts were up 30 percent for the fiscal year to date to $133 billion from the same period in 2009. Individual income tax collections are down 4.4 percent year to date to $655.4 billion. Spending for the entire government for June increased 3.2 percent from the same month a year earlier to $319.5 billion. Spending by the Defense Department year to date rose to $499.1 billion from $472.8 billion in 2009. Outlays by the Social Security Administration increased to $564.2 billion for the fiscal year to date from $544.7 billion. Spending by the Department of Health and Human Services, which administers the Medicare and Medicaid programs, climbed to $631.4 billion.

President Barack Obama’s budget office will release its revised forecast for the U.S. economy on July 23, spokesman Kenneth Baer said on July 9. The Office of Management and Budget’s mid-session review will provide an update on the expected growth in the economy, unemployment and the deficit for fiscal 2010, which ends on Sept. 30. The Obama administration’s budget proposal was sent to Congress in February. The president today named Jack Lew, currently a top aide to Secretary of State Hillary Clinton, as head of the OMB. Lew would have to develop an austere budget that charts a path toward fulfilling Obama’s commitment to cutting the 2009 deficit of $1.4 trillion in half in five years. That would be accomplished partly through a freeze on spending outside of defense and national security programs, as outlined by Obama in February.