Capital Gold Group Report: U.S. October Budget Deficit Swells to a Record $237.2 Billion

Nov. 13 (Bloomberg) -- The U.S. budget deficit last month exceeded the shortfall for President George W. Bush's first full year in office, spurred by purchases of stakes in a group of the nation's largest banks.

The deficit in the first month of the 2009 fiscal year climbed to a record $237.2 billion, compared with a gap of $56.8 billion in October last year, the Treasury Department reported today in Washington. Revenue fell 7.5 percent, while spending soared 71 percent.

Treasury Secretary Henry Paulson spent $115 billion last month to buy shares in eight of the biggest U.S. banks as part of his $700 billion Troubled Asset Relief Program. Deteriorating credit conditions and the economic slump are straining the nation's finances and will leave President-elect Barack Obama with a deficit worse than the record $455 billion of last year.

``The federal deficit appears to have risen sharply relative to the year-ago level in October, mostly reflected TARP bank capital infusions,'' UBS economist Samuel Coffin wrote in a research note before the release of the report. ``Uncertainty over scoring for TARP and other items adds to the challenge in forecasting the fiscal year budget deficit, but we project a rise to $1.175 trillion.''

The October deficit was forecast to widen to $200 billion, according to the median of 32 estimates in a Bloomberg News survey of economists. Today's total exceeds the $232 billion gap predicted by the Congressional Budget Office on Nov. 10.

Corporate income tax receipts fell to $81 million in October, from $6 billion a year earlier, according to the Treasury.

Revenue Drops

Total revenue fell to $164.8 billion in October, compared with $178.2 billion a year ago, according to the Treasury report. Spending increased to $402 billion from $235 billion last year.

Outlays for the Social Security Administration rose by 13 percent from a year ago to $59.2 billion) from $52.6 billion, while Department of Defense spending rose 16 percent to $66.1 billion from $57 billion. Spending by the Department of Health and Human Services, which administers the Medicare and Medicaid health programs, totaled $76.5 billion, up 31 percent.

The Treasury this month said it will more than triple its planned debt sales this quarter to help finance this year's shortfall.

Borrowing needs are expected to rise to $550 billion in the three months to Dec. 31, compared with the $142 billion predicted in July. Bond trading firms predicted the shortfall may rise to $988 billion in 2009.

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