In 2010, Congress and the President agreed on a budget that required borrowing 43 cents of every dollar. And it will be closer to 45 or 46 cents in fy 2011. The obvious yet rarely discussed option answer is to cut defense and military spending, though outside of Paul, Paul and Kucinich, few others have reached the same conclusion.
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The U.S. government posted a wider budget deficit in January as spending climbed from a year earlier when outlays were depressed by the New Year’s holiday.
The gap totaled $49.8 billion last month, lower than the median forecast of economists surveyed by Bloomberg News, compared with a $42.6 billion shortfall in January 2010, figures from the Treasury Department showed today in Washington. An 11 percent increase in spending exceeded a 10 percent gain in revenue that reflected growing income tax receipts as the economy improved.
The compromise between President Barack Obama and congressional republicans that extended Bush-era tax cuts, renewed emergency jobless benefits and reduced payroll taxes may push this year’s budget shortfall to a record, surpassing the $1.4 trillion reached in 2009. Republicans, who took control of the House after last year’s election, have made spending cuts a top priority.
“It’s still a very wide budget deficit,” said Michael Moran, chief economist at Daiwa Capital Markets America Inc. in New York, who forecast a $50 billion gap. “We’re going to have a similar performance as last fiscal year. Congress needs to do something on the budget. The situation as it stands now is not sustainable.”
This year’s budget deficit is projected to reach $1.5 trillion, according to a Congressional Budget Office estimate released Jan. 26. Economists at Goldman Sachs Group Inc. in New York projected it will climb to $1.35 trillion from last year’s $1.29 trillion.
Year to Date
For the fiscal year to date, the deficit totaled $418.8 billion compared with $430.7 billion the prior fiscal year to date, according to the Treasury’s data.
“Everybody agrees the deficit is too big, but no one is willing to do anything about it -- raise taxes or cut spending, and that means draconian cuts in government entitlement plans,” such as Medicare, David Wyss, chief economist at Standard & Poor’s in New York, said before the report.
More Spending
The Treasury’s report showed that government spending rose to $276.3 billion in January from $247.9 billion a year ago, when the New Year’s holiday fell on a Friday, pushing more government payments into December 2009, the CBO said in its forecast. “If the effects of shifts in the timing of certain payments were excluded, the deficit would be $16 billion less in January 2011 than it was in January 2010,” according to the CBO’s estimate.
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