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U.S. Budget Deficit Increased To $305 Billion in Fiscal Half
WSJ Online
April 7, 2006

WASHINGTON -- The U.S. government ran a budget deficit of $305 billion in the first half of the fiscal year, $10 billion more than a year earlier, the Congressional Budget Office estimated.

But the CBO said in a new monthly budget update that the midyear deficit would be slightly lower than a year earlier when adjusted for calendar-related shifts in the timing of tax refunds and certain salary and benefit payments. The government fiscal year begins in October.

The new report showed strong growth in corporate-tax receipts, which is expected to slow appreciably in the period ahead, as well as a surge in interest spending on the public debt. Revenues surpassed those from the same period a year earlier by around $100 billion, or nearly 11%, the CBO said.

The budget office said individual receipts grew by $37 billion, or 9%, and that receipts from corporate income taxes increased by about $31 billion, or 31%, in the first half of 2006. "The payments in March largely represented the last major receipts from corporate returns for tax year 2005," it said, adding that "receipts for tax year 2006 are expected to grow much more slowly because of slower growth in profits and the expiration of certain tax provisions that boosted receipts in 2005.

The CBO estimated outlays grew 9%, and said spending for interest on the public debt, which rose by 27%, accounted for roughly a quarter of the increase.

Medicare spending was up by roughly 22% in the second quarter, driven largely by the new prescription-drug benefit, which took effect in January, the CBO said. "In the first quarter, Medicare spending rose by about 7%, for an average increase of about 15% relative to the first six months" of the previous year, it said.

Defense outlays grew by 6.5% through March on an adjusted basis relative to the same period last year, the CBO said.

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