2010 Budget Deficit Comes in Below Expectations -- but Still Second-Highest Ever

2010 Budget Deficit Comes in Below ExpectationsThe federal government on Friday posted a smaller-than-expected $1.29 trillion budget deficit for fiscal 2010, which ended Sept. 30 -- more evidence that the U.S. economy continues to inch back toward health. It was, however, still the second-highest deficit on record, behind the $1.42 trillion posted in fiscal 2009.

The government posted a $34.49 billion deficit in September, the last month of fiscal 2010, slightly higher than the $32 billion Bloomberg survey consensus estimate. The federal government reported a $45.2 billion deficit in September 2009.

Annual federal spending fell by 1.6% to $3.46 trillion -- but investors should keep in mind that outlays in 2009 were boosted by the TARP and fiscal stimulus package.

More significantly, fiscal 2010 revenue increased 2.7% to $2.16 trillion -- and the increase, although small, provides more evidence that the U.S. economy continues to recover. Historically, government revenue from income taxes and corporate taxes has tended to increase during periods of economic expansion, as more Americans find jobs and corporate revenues rise.

Markets Yawned at Report

The release of September's budget deficit data Friday had little impact on the market for U.S. Treasuries, with the 10-year note virtually unchanged at 2.58%. The low rate indicates that despite its high national debt, institutional investors -- from pension funds to foreign governments -- remain confident in world's largest economy's ability to service its debts.

U.S. stock markets likewise showed little reaction to the announcement, at least initially. The Dow Jones Industrial Average, down about 45 points before the announcement, traded down about 40 points to 11,051 in the initial minutes after the data' s release.

Back in July, the Obama administration had forecast a record $1.47 trillion deficit for fiscal 2010. The Congressional Budget Office's forecast was for a $1.34 trillion deficit for fiscal 2010, and it has projected a $1.07 trillion deficit for fiscal 2011. The federal government also posted a $454.8 billion deficit in fiscal 2008.

There was one small shadow on September's otherwise positive statistics: Revenue for the month rose 12% to $245.2 billion from $218.9 billion a year earlier -- a substantial increase, but slightly lower than the 12.7% year-over-year revenue increase recorded in August. Should that pattern continue, it could be a reflection of the U.S. economic recovery losing steam.

However, economists and budget analysts are quick to point out that two months worth of data is not enough to conclude that a revenue trend has formed.

Small Steady Improvements

Government spending rose 10.1% in September to $279.7 billion from $254.1 billion a year earlier. Economists expect the growth in federal spending to slow this year, as outlays for TARP and related financial system support programs, and for fiscal stimulus, declines.

Taken together, the September and fiscal 2010 deficit report continues to reflect a modestly improving budget picture -- one that confirms a slowly recovering U.S. economy. Growth in international sales has boosted revenue and earnings for many U.S. corporations, increasing their tax payments to the U.S. Treasury.

Provided that trend continues and the U.S. economic expansion picks up speed with sustained job growth, policy makers will find the task of crafting the next budget a bit less difficult because, all other factors being equal, it's easier to balance a budget during a period of rising revenue than during the opposite.

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Fluff. Your post on the banking tax is bogus. Might want to check the following which labeled this a hoax. http://www.politifact.com/oregon/statements/2010/oct/01/chain-email/e-mail-claims-defazio-wants-tax-transactions/ There is a Congressman (not DeFazio) who has proposed this since 2004. The fact that you just heard about it shows how viable it is. The actual congressman who proposed this tax says it would raise enough money to eliminate the federal income tax. Actually it would shut down the banking system.

October 17 2010 at 7:26 PM Report abuse -3 rate up rate down Reply
7 replies to clark8642's comment

Probably creative accounting.

October 17 2010 at 7:04 PM Report abuse +5 rate up rate down Reply

Well Fluff I did not realize that all our problems are caused by illegal aliens. Apparently as soon as we get rid of them we can see if you are correct. If you are, then we can begin talking about a new round of tax cuts to replace those that expire at the end of the year. In the meantime should we push our Congress to find other spending cuts just in case you are wrong?

October 17 2010 at 6:47 PM Report abuse +1 rate up rate down Reply
1 reply to clark8642's comment

I sure hope this is correct however I know that sooner or later a report will come in showing that the deficit was under-calculated and is much higher than originally reported.

October 17 2010 at 6:13 PM Report abuse +1 rate up rate down Reply
1 reply to llozano's comment

Yeah right. Just in time for the elections. Are the American people that stupid? We'll see.

October 17 2010 at 6:00 PM Report abuse +3 rate up rate down Reply

At deficits of 1.3 to 1.4 trillion per year, this mess mandates two things. First, tax cuts really aren't realistic. I mean come on, this isn't rocket science. If you're spending more than you earn, do you resolve the problem by trying to earn less money? Let's get real here. But second, and this is the most critical, spending needs to be seriously curtailed. We don't run deficits because we tax too little, we run deficits because we spend too much. The real problem here is not deficits, it's the national debt. Balancing the yearly budget only means we don't continue to add to our 13.5 trillion dollar debt. So far, the only thing I've heard from D.C. is the complete opposite. Let's cut taxes and keep on spending. It's done wonders for my gold stocks, but it sure isn't helping the country.

October 17 2010 at 5:39 PM Report abuse +2 rate up rate down Reply
1 reply to rbrown1959's comment

Amen on your tax cut comment and a double amen on your spending cut comment.

October 17 2010 at 5:49 PM Report abuse rate up rate down Reply

I'm glad I had my shovel ready, it seems like more BS coming out of government. Cut Spending, Cut Taxes ,Term Limits.......

October 17 2010 at 5:29 PM Report abuse +6 rate up rate down Reply

Whoopeeee! You mean we are ONLY $1.3 trillion in the hole this year! That is great news! I am so glad Daily Finance, AOL, and Joseph Lazzaro are keeping us so informed. And here we thought the economy was so deep in the tank. Next year's budget, that they are keeping from us until after the election, is only going to be $3.8 trillion...in one year! All we have to do is keep printing the money. Before you know it there won't be and America any more....we will be part of the United Countries of the World (UCW)...you know the one world goverrment that they are heading us for...you know, destroy America so it can happen. THAT IS THE REAL PLAN. Last chance...vote them out this November and November 2012 or we will just become slaves of the one world government people. Wake up America, don't let this propaganda BS sway you. Be smart.

October 17 2010 at 5:07 PM Report abuse +8 rate up rate down Reply
1 reply to DemocracyInPeril's comment

demo BS!!!! I am smart, but not as smart as you. melon i really hope that you understand where this deficit came from. Not health care, not any of the new economy.

October 17 2010 at 6:40 PM Report abuse rate up rate down Reply

When we no longer have a job or a home, how does 'HuHo' expect us to come up with enough money to support his habits for another year? There is no such thing as a deficit...balance with what you have or get out of office.

October 17 2010 at 4:37 PM Report abuse +12 rate up rate down Reply

rh Seems like your point is a little repetitious. Anyhow, the only way the deficit will get worse is if we pass a new round of unaffordable tax cuts to continue transferring wealth from the future to the present. I'm all for tax cuts after we cut spending by enough that we can afford them.

October 17 2010 at 4:31 PM Report abuse +8 rate up rate down Reply