March 10 (Bloomberg) -- The U.S. posted its largest budget deficit on record in February as the government boosted spending to help revive the economy. The excess of spending over revenue increased to $221 billion last month, compared with a deficit of $194 billion in February 2009, according to Treasury Department figures released today in Washington. In fiscal 2009 that ended in September, the shortfall reached a record $1.4 trillion.
A deficit that will probably exceed $1 trillion for a second year underscores the challenges facing the Obama administration and Congress as they seek to preserve the recovery, spur job growth and pass health care reform. The loss of 8.4 million jobs the last two years has been limiting tax revenue, while stimulus efforts such as the first-time homebuyers credit have added to expenses.
“It’s mostly the recession if you look at the deficit numbers,” said David Wyss, chief economist at Standard & Poor’s in New York. To finance the shortfalls, “we’re borrowing a lot of money from abroad. At some point, foreign investors are going to be unwilling to fund it,” he said.
The February deficit was in line with the $222 billion economists anticipated, based on the median of 31 estimates in a Bloomberg News survey. Projections ranged from shortfalls of $180 billion to $225 billion.
The non-partisan Congressional Budget Office, in a report issued March 5, projected a deficit of $223 billion for February.
Spending for February increased 17 percent from the same month a year ago, to $328.4 billion. Revenue and other income rose 23 percent to $107.5 billion, according to the Treasury.
First Five Months
The deficit five months into the 2010 fiscal year was $651.6 billion compared with $589.8 billion during the same period in the previous fiscal year.
Corporate tax receipts totaled $45.4 billion for the year to date versus $52.8 billion in the same five months in fiscal 2009. Individual income tax collections were down 14 percent so far this fiscal year to $334 billion.
In other categories, spending by the Social Security Administration rose to $308.6 billion from $290.1 billion for the fiscal year to date. Spending by the Department of Health and Human Services, which administers the Medicare and Medicaid health programs, rose to $342 billion from $319.6 billion.
Defense Department spending rose to $273.9 billion from $267.4 billion, while spending on the Troubled Asset Relief Program fell to $8.7 billion from $113.3 billion.
The government’s $787 billion economic rescue plan contributed to the record deficit in fiscal year 2009. The shortfall will probably exceed $1 trillion this year, according to the White House and congressional budget officials.
Debt Limit
Mounting monthly deficits prompted President Barack Obama to sign a bill on Feb. 12 that raised the federal debt limit by $1.9 trillion to $14.3 trillion. The increase was required to keep the U.S. from defaulting on its bills. It is more than twice the size of any of the four previous debt increases lawmakers approved in the past two years.
The CBO said March 5 that the Obama’s 2011 budget proposal would create bigger annual deficits than projected. The CBO said the budget shortfall will remain above 4 percent of gross domestic product for the foreseeable future while the publicly held debt will reach $20.3 trillion, or 90 percent of GDP, by 2020.
Economists generally consider deficits exceeding 3 percent of GDP to be unsustainable because that means government debt is growing faster than the ability to pay back the money.
Obama’s budget request projected the government would run $8.5 trillion in deficits over the next 10 years.
