U.S. Budget Deficit Increasing Again

Confirming the view that the U.S. has dipped into a recession is the latest budget numbers from the Congressional Budget Office. These numbers are preliminary and is often revised, but the final numbers usually differ by only little, and can differ both ways so it is meaningful to look at them. The numbers show that during the first two months of fiscal year 2008 i.e. October-November 2007 the budget deficit increased by $35 billion from $157 billion to $192 billion.

Some of this increase reflects calender effects as December 1 fell on a weekend this year, meaning that payments that last year were made in December were now made in November. However, it should be noted that the effect this had in temporarily boosting spending were also reflected in a boost to revenues, so the net effect of adjusting for this isn't as big as the $17 billion effect on spending the CBO refers to.

Revenues for the first two months rose less than 5% in nominal terms before adjusting for the aforementioned calendar effects. The November reveneus actually only rose 3% before adjusting for the calendar effect. So particularly for November, tax revenues adjusted for calendar effects and inflation are in fact falling.

Corporate tax revenues are falling particularly fast, indicating a significant decline in corporate profits.