June Deficit Roars at $94.32 Billion
by Hiland Doolittle
In keeping with recent data, the only surprise with the U.S. government’s June budget deficit was the magnitude of the $94.32 billion price tag. The June Treasury report marked the ninth consecutive month the U.S. government has run a deficit and is the highest June deficit on record. Typically, June is a productive month for government. In fact, the last time the government operated a deficit in June was 1991.
On three previous occasions, government has run deficits 11 consecutive months. As the Treasury extends efforts to boost the economy, pressure from automakers and banking continues to pressure the government.
Historically, June is a productive month for the economy. In June 2008, the budget benefited from a $33.65 billion surplus. According to the Treasury Department, the largest single monthly deficit on record was the $194 billion accrued in February 2008.
June concludes the first nine months of the government’s fiscal 2009. The deficit for this period now stands at $1.086 trillion. The budget deficit through June 2008 was $285.85 billion.
Economists now project the Federal deficit will surpass the 11-month streak and continue on deep into the third quarter 2009. Citing the breadth and depth of the unemployment crises, economists now expect a deficit of $1.5 trillion in fiscal 2009.
John Silva of Wells Fargo Securities explained; “The Federal Deficit is now at a post World War II high and is likely to continue to rise in the near term as deficits rise and the economy remains weak. These deficits will influence the allocation of global savings for the foreseeable future. No doubt where this train is going.”
Treasury Operations Soar
In May 2009, The White House predicted the deficit for fiscal 2009 would top the $1.84 trillion mark. The 2008 deficit was $459 billion. The government has extended $700 billion in Rescue Funds through its Troubled Asset Relief Program and has launched its $787 billion stimulus package.
While only 10% of the stimulus package has gone out the door, the government is under pressure to start spending. Obama’s stimulus package may be the wild card in the employment and housing deck. Until that card is played, unemployment, housing and health care remain big-ticket items confronting the Obama Administration and prolonging the longest and deepest recession in history while creating the escalating deficits.
The government income and expense sheet shows income of $215.36 billion, down from $259.91 billion in June 2008. The decline is the 14th consecutive month that year over year income has declined.
Government spent $309.68 billion in June compared to $226.37 in June 2008. $5.4 billion was spent on mortgage-backed securities from Fannie Mae and Freddie Mac.
Geithner Paints a Better Picture
The equity markets appeared unbothered by the magnitude of the government deficits as investors held optimistic views of Goldman Sachs and other anticipated earnings reports. Treasury Secretary Geithner, speaking in London, suggested that the U.S. and Britain were headed for a period of growth rather than the originally expected period of double-dip recession.
“We have a very powerful set of policies in place, coming on stream. I think there is a very good chance we will see the U.S. economy and the world economy get back to recovery, get growing again, over the next few quarters,” said Geithner.
Geithner acknowledged that risks and unexpected challenges lay ahead but that; “policies have been very effective in arresting, in mitigating the forces of the storm and we’re starting to see a better basis for recovery starting to be made in the U.S.”
Geithner’s suggestion that several economies, specifically Asian economies, would lead the charge away from the recession gained credibility as Japan reported industrial output rose 5.7% in May.
Meanwhile, Li Dongrong, an assistant governor of the People’s Bank of China, said that China’s banks issued 1.53 trillion yuan ($223.9 billion) in new loans in June.
Tags: 2009 Stimulus Package, Bailout, Bank of England, depression, dollar, Economy, European Central Bank, Forex Commentary, GDP, housing, interest rates, US Dollar, US NonFarm Payrolls, US Retail Sales, US Unemployment
About the Author - Hiland Doolittle
Hiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses.
Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.
