Tuesday, August 25, 2009

CBO Expects a 24% Increase in Gvt Outlays and a 17% Decrease in Revenues

Now that's how you get an exploding deficit

The federal budget deficit for 2009 will total $1.6 trillion, according to the Congressional Budget Office. This will result in it being equal to 11.2% of gross domestic product (GDP). This will be the highest percentage of GDP since World War II.

The dramatic expansion of the deficit in 2009 (up from 3.2 percent of GDP in 2008) results from a projected rise in outlays of 24 percent (the largest percentage increase since 1952) and a drop in revenues of 17 percent from last year’s levels (the largest percentage drop since 1932).

Those changes have largely been the result of the severe economic downturn and the Keynesian fiscal policy response of the Bush and Obama administrations.

On the basis of tax collections through July 2009, CBO expects federal revenues to decline by more than $400 billion from last year’s total. Revenues are projected
to be 14.9% of GDP, nearly 300 basis points below the 2008 level.

Although the CBO anticipates declines in almost all sources of revenue,the decrease is largely attributable to the drop in receipts from individual income taxes (which are expected to fall from 8.1 percent of GDP to 6.5 percent) and corporate income taxes (which are estimated to decline from 2.1 percent of GDP to 1.0 percent).

1 comment:

  1. Holy moly. Corporate income tax receipts are going to drop by over 50%? By the government's always optimistically wrong estimates?

    There's no way that unemployment is anywhere near peak. Or am I wrong?