Deficit Expected to Rise After Stimulus Package
Nashville City Paper
May 13, 2008

he U.S. budget surplus narrowed in April from a year ago, reflecting increases in spending on defense and programs such as Social Security and Medicare.

Revenue last month rose 5.2 percent, while spending increased 18.7 percent, leaving a surplus of $159.3 billion, the Treasury said today in Washington. The excess was down from a $177.7 billion surplus in April 2007.

The budget deficit this fiscal year will probably increase for the first time since 2004 as a slowing economy and the worst housing recession in 25 years shrinks tax revenue. The Bush administration's $168 billion economic stimulus package and the $12 billion a month spent on the wars in Iraq and Afghanistan also worsen prospects.

"There'll be a big rise in the deficit over the next couple of months," said David Sloan, a senior economist at 4Cast Inc. in New York. "At least half of the fiscal deterioration is going to come from the stimulus package." Sloan said this year's gap will swell to more than $400 billion from $163 billion in fiscal 2007.

Economists predicted an April surplus of $160 billion, according to the median of 32 estimates in a Bloomberg News survey, the same as the Congressional Budget Office projected last week.

April 15

The government always runs a surplus in April because of the jump in individual and corporate tax payments ahead of the Internal Revenue Service's mid-month deadline.

About half the jump in spending in April reflected a calendar shift last year, according to the CBO projections. April 1, 2007, fell on a weekend, forcing some payments into the month before.

The Bush administration projects this year's deficit will rise 151 percent from a year ago to $410 billion, in part due to the rebates from the stimulus plan. The U.S. posted a record $413 billion deficit in 2004.

Revenue last month rose to $403.8 billion, compared with $383.6 billion in April 2007. Spending increased to $244.5 billion from $206 billion last year.

Last month "benefited from a better-than-expected tax season as incomes in 2007 held up better than we had thought," Edward McKelvey, a senior economist at Goldman Sachs Group Inc., said in a note to clients before the report today. "As a result, while we maintain our view that the budget deficit will reach $500 billion this fiscal year, the risks have swung to the downside of that estimate."

— Bloomberg News

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