Federal Deficit Hits Record $1.42 trillion

If you thought last year’s federal budget deficit was pretty big, you were right—and it’s three times as big now! Thanks to the magic of the recession, as well as the government’s attempts to rescue various sectors of the economy (and throw money at others, or so it appeared), the deficit for the 12 months ending last month was a whopping $1.42 trillion.  —KA

Bloomberg.com:

An unemployment rate that’s projected to exceed 10 percent may further hurt revenue, even as a recovery from the recession increases receipts from corporate taxes. The country’s lagging labor market is a central reason government and private forecasters don’t expect the deficit to narrow in the current budget year.

“Corporate and business income-tax collections have fallen off a steep cliff, and the old-time ‘prime-the-pump’ budget expenditures to fight recession are hitting new records,” Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report.

An estimate released Aug. 25 by President Barack Obama’s administration predicted a deficit of $1.5 trillion in fiscal 2010. According to a monthly Bloomberg News survey of economists, the shortfall as a percentage of gross domestic product will run at 9 percent in fiscal 2010.

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