11/13/2008 Washington The Treasury Department said Thursday that the deficit for the
first month in the new budget year was the highest monthly
imbalance on record. It was far bigger than analysts expected, over
four times larger than the October 2007 deficit of $56.8 billion,
and more than half the total for all of last year.
The big surge reflected the government spending $115 billion to
buy stock in the nation's largest banks. Those were the first
payments made from the $700 billion government rescue program
passed by Congress to deal with the most severe financial crisis to
hit the country since the 1930s.
The October deficit began a period in which economists are
forecasting the red ink for the entire year could well hit $1
trillion, reflecting what many expect to be a severe recession,
which will depress tax revenue, and the heavy costs of the
financial system bailout.
President-elect Barack Obama has said that getting the economy
back on track will be his top priority and has promised to work
with Congress to pass a second stimulus program.
The $237.2 billion deficit for October included total government
spending of $402 billion, a record in terms of outlays.
The spending figure included $115 billion paid to some of the
country's largest banks to buy stock, the beginning of a program in
which the government will spend $250 billion before the end of the
year to take ownership shares in hundreds and potentially thousands
of banks. The goal is to bolster banks' balance sheets so that they
will resume more normal lending and keep the country from falling
into a prolonged recession.
The deficit also was boosted by the government's move to
purchase $21.5 billion in mortgage-backed securities, an effort the
Bush administration announced when it took control of mortgage
giants Fannie Mae and Freddie Mac in September because of rising
losses in that market.
Government receipts in October totaled $164.8 billion, down 7.5
percent from October 2007, reflecting the impact on revenues from
the slumping economy.
For the 2007 budget year, which ended on Sept. 30, the deficit
totaled a record $454.8 billion, reflecting the impact of the weak
economy on revenues and a $168 billion stimulus program which sent
stimulus payments to millions of Americans during the spring and
early summer.
The Bush administration in July estimated that the deficit for
the current budget year could hit $482 billion, but that projection
was made before the administration got Congress to pass a $700
billion rescue program on Oct. 3.
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