Due to decreased tax revenue and unprecedented government spending on the bank bailout, the deficit for the first five months of this budget year has reached $765 billion. Obama`s administration predicted that this year`s budget deficit will amount to $1.75 trillion, and with the recent figures posted, they`re on track toward the record high. The Treasury Department released this recently compiled data on Wednesday.
The Department also announced that the deficit for last month alone was $192.8 billion: a new high for the month of February and a 10 percent increase over the figure one year ago. On the upside, the final total didn`t even match the $205.7 billion analysts predicted it would reach for February.
The new budget year, which began last October, has already broken the record set for the 2007-2008 budget year by about $310.2 billion. The previous record was $454.8 billion: once regarded as astonishing.
But the previous administration hadn`t inherited the worst recession to strike the U.S. economy since World War II. Now Obama`s administration has to pick up the pieces and try to restore economic stability to the country.
The recession is largely to blame for the government`s financial woes, as President Obama has alleviated taxation on households nationwide, slashing crucial finances the government needs. Obama`s tax breaks to taxpayers lessened the overall incoming tax revenue for February to $87.3 billion: a 17 percent cut from the revenue garnered last year at this time. All other revenue gathered by the government also took a hit compared to 2008. The $860.8 billion they collected was down 11 percent from the February 2008`s five-month total.
The $700 billion bailout package passed by Congress in October has also damaged the projected costs to the Treasury.
Spending remained stagnant for the month at a manageable $280.1 billion, but the previous four accounted for much of the period`s deficit. This budget year`s spending escalated 32 percent from a year earlier to a staggering $1.63 trillion.
According to a monthly statement published by the Treasury Department, $290 billion of the government`s reserves have been allocated to the bank rescue plan thus far in this calendar year. This money was utilized to help bolster the deteriorating capital of almost 500 banks nationwide to prevent an entire financial collapse.
But to reiterate the conditions of the bailout money infused into national banks, those eligible for federal aid must recompense the government with 5 percent monthly dividends. Last month alone, banks receiving lifelines paid over $2.2 billion in dividends as the Treasury had released.
As a side note, President Obama admitted on Wednesday that he would soon ratify another $410 billion to be spent to sustain the government for the remainder of the year. The president`s bill has received criticism and considerable backlash for the smaller projects linked with the money. Opponents, including Obama`s former presidential rival Senator John McCain, declaim that the projects are more exampled of wasteful spending. Obama himself has pronounced the bill as less than perfect and is more of a sign ushering in a newer and fairer method in doing business.
Once September 30th rolls around, the $787 billion economic stimulus package that was passed by Congress in February will be accounted for in year-end final deficit, which wasn`t even factored into last month`s imbalance. The positive repercussions resulting from the package haven`t yet made a substantial dent into the faltering economy, but analysts set a timetable giving the package adequate time to buoy the nation`s economy.
Pundits are still concerned over how Obama plans to begin cutting the deficit down by 2010. His administration`s initial budget predicts the nation`s deficit will plummet to $1.17 trillion by then, $912 billion in 2011. On this constant sloping scale, Obama projects the deficit will then be trimmed to $581 billion and finally to $533 billion in 2012 and 2013 respectively.
Those in the financial world outside Obama`s circles report that the figures that are already monumental in scope are rather optimistically low considering how the administration is assuming the best for the economy. In all likelihood, the recession will not reemerge at such a successful rate. And in that scenario, it will spell lower tax revenues and inflated deficits in the future that would prove the president`s so-called experts wrong.