Christopher S. Rugaber
AP Economics Writer
WASHINGTON (AP) — Lower tax revenue and massive government spending on the bank bailout pushed the federal deficit to $765 billion in the first five months of the budget year, well on its way to hitting the Obama administration’s projection of a record annual imbalance of $1.75 trillion.
The Treasury Department also said Wednesday that the February deficit reached $192.8 billion. That’s a record for the month and up 10 percent from a year ago, but below analysts’ expectations of $205.7 billion.
With seven months left in the current budget year, which ends Sept. 30, the deficit already has shattered last year’s record annual gap of $454.8 billion.
The huge deterioration in the government’s finances is due to the recession, which has cut into tax revenues, and the large amounts of money being spent from the $700 billion financial rescue plan that Congress passed in October.
The slow economy sharply reduced the government’s tax revenue last month to $87.3 billion, 17 percent below the previous year. The government has collected $860.8 billion in revenue through February, 11 percent below the year-ago period.
Spending, meanwhile, was flat last month at $280.1 billion. But total spending in the first five months of the budget year jumped 32 percent to $1.63 trillion compared with the same period last year.
The government has spent $290 billion on the bank rescue program so far this year, the Treasury Department said in a monthly statement. Most of the aid came as capital injections, which the government has provided to nearly 500 banks.
The government receives preferred shares in return for its investment, which carry a 5 percent dividend. The banks paid about $2.2 billion to the government in dividends last month, the department said.
Separately, President Barack Obama said Wednesday he would sign a $410 billion spending package to fund the government until the end of the year. The bill contains nearly 8,000 pet projects. Critics, including Obama’s campaign rival Sen. John McCain, have denounced those earmarks as pork.
Obama called the bill “imperfect” and insisted it must signal an “end to the old way of doing business.”
The red ink this year also will reflect the $787 billion economic stimulus package that Congress passed last month in an effort to jump-start an economy in the grips of the worst recession in decades. None of that spending is included in the February figures.
The administration’s first budget projects the deficit will drop to $1.17 trillion in 2010, and then to $912 billion in 2011. It projects the deficit will plunge to $581 billion in 2012, and $533 billion in 2013, the year the administration has promised to cut the deficit in half.
But many private forecasters believe the deficit projections, gigantic as they are, will prove optimistic because the administration based them on economic assumptions that are too rosy.