Deficit grew by $181 billion in July By Walter Alarkon

08/09/09



Bailouts for financial firms and billions in tax revenue lost because of the recession drove the deficit to a record $1.3 trillion in July, according to the independent Congressional Budget Office (CBO).



Tax receipts that have fallen due to the poor economy and increased spending to save car companies, banks and mortgage firms were major contributors to the federal deficit, according to CBO, which provides official budget numbers for Congress. The federal deficit grew by another $181 billion in July.


Falling tax receipts and increased spending on bailouts for auto companies and the financial sector and for the economic stimulus package added to the deficit, according to CBO, which provides official budget numbers for Congress.Spending through July of 2009 has increased by $530 billion, which is 21 percent over the same period in 2008.



The bailout money for Freddie Mac and Fannie Mae accounted for almost half of the spending increase. Unemployment benefits have more than doubled, Medicaid spending has grown by a quarter and Medicare spending has increased by 11 percent.



Tax revenue for the first three quarters of 2009 has fallen by approximately $350 billion, or 17 percent compared to the same period last year, due mostly to the effects of the recession on payroll, income and corporate taxes.



A third of the decline is due to tax breaks in the stimulus, including the middle-class tax cut that President Obama campaigned on during last year's election.



The independent budget scorekeeper has projected the deficit to reach $1.8 trillion by the end of the fiscal year, Sept. 30. The deficit in 2008 reached $455 billion, which was a record at the time.



The latest deficit projections come as Democrats in Congress and the White House are pushing for healthcare reform criticized by Republicans as too costly.



House Speaker Nancy Pelosi (D-Calif.) stressed during a town-hall meeting in Colorado this week that the healthcare bill won't add to the deficit or restrict benefits and instead will increase access to care. But lawmakers have yet to settle on a way to pay for the bill, expected to cost roughly $1 trillion over the next decade. Pelosi has supported an income surtax on the highest earners, those making more than $280,000, while senators are considering a tax on insurance companies that offer expensive health plans.



Sen. Judd Gregg (N.H.), the top Republican on the Budget Committee, said that Democrats in Congress aren't doing anything to address the record deficit and are instead pushing ahead with “wildly expensive” healthcare legislation.

“To allow the deficit to hit these previously unthinkable levels – while still planning to implement massive new
spending programs – shows an incredible lack of fiscal responsibility, especially toward the future generations who will be saddled with the consequences of today’s actions,” Gregg said.

One poll released last week suggests that the GOP attacks are starting to work. A Rasmussen survey of likely voters found that 71 percent believe Obama's policies have increased the deficit. While most -- 54 percent -- blamed the recession that started during the Bush administration for the country's fiscal situation, 39 percent blamed Obama's policies.