The United States posted a record $956.8 billion (Dh3.5 trillion) budget deficit for the first half of fiscal 2009, more than triple the year-ago shortfall, as spending on financial and economic rescue programmes ramped up, the Treasury Department said.
For March, the government recorded a deficit of $192.27bn, a record for the month and nearly four times the year-ago gap of $48.21bn. March budget outlays ballooned to $321.23bn, including $46bn spent to inject capital into government-controlled housing finance companies Fannie Mae and Freddie Mac and $10.6bn for federally subsidised unemployment benefits. The total outlays compared with $227.02 bn for March 2008.
The March outlays would have been even larger, but the federal government shifted about $15bn of benefit payments into February because March 1 was a Sunday.
March receipts fell sharply as a rapidly deteriorating economy dried up tax revenue from individuals and businesses. Receipts for the month fell 28 per cent to $128.96bn from $178.82bn a year earlier.
In addition to the capital support for Fannie and Freddie, the government purchased $17.38bn of mortgage-backed securities from government-sponsored enterprises, marking a total of $119.2bn for the first half of fiscal 2009.
The nearly $1trn deficit in the first half of the fiscal year is consistent with some private forecasts that the fiscal 2009 shortfall will be in the $1.6trn to $2trn range, dwarfing the 2008 record of $454.8bn. The government is now increasing spending on infrastructure and tax cuts under the Obama administration's $78bn economic stimulus plan. It is also spending more on housing relief that uses financial bailout funds.
It has not yet determined whether to ask Congress for additional funds to strengthen the financial sector, although Obama's 2010 budget plan contains a "placeholder" that envisions up to $750bn of asset purchases from financial institutions.
The government has now run deficits in each of the past six months – the first time that has occurred since the October 2003 through March 2004 period, when tax cuts reduced revenue and Iraq war spending increased.
Recovery likely only in 2010
The United States economic growth is likely to turn positive again only in 2010, said Richard Fisher, President of the Dallas Federal Reserve Bank.
In an interview in Tokyo on the first leg of an Asian tour, Fisher said GDP figures are likely to be just as bad in the first quarter of 2009 as in the final quarter of 2008, when growth fell by an annualised 6.3 per cent.
The economy will get "less worse" as the year goes on, he said, but will continue to contract for the rest of 2009. Fisher described what he called recent "green shoots" of revival in financial markets and the economy – such as a pick-up in bond and a decrease in mortgage and interbank lending rates – but said "we are still a far way away" from a real recovery.
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