WASHINGTON – The federal budget deficit hit an all-time high for April as the government kept spending to aid the recovery while revenue fell sharply.

The Treasury Department said Wednesday the April deficit soared to $82.7 billion. That was significantly higher than last year’s April deficit of $20 billion and the largest imbalance for that month on record. April’s record deficit was higher than it would normally be because about a third of the increase resulted from benefits for May that were paid on the last day in April, analysts note. That was because May 1 fell on a Saturday.

The government normally runs surpluses in April as millions of taxpayers file their income tax returns. However, income tax payments were down this April, reflecting the impact of the recession that has pushed millions of people out of work.

Total revenues for April were down 7.9 percent from a year ago.

The Obama administration forecast in February that the deficit for this year will hit an all-time high of $1.56 trillion, surpassing the current record $1.4 trillion set last year. Many private economists believe this year’s imbalance will be closer to last year’s figure and that deficits will remain high for years to come.

The trillion-dollar-plus deficits are being driven by the impact of the recession, which has cut government tax revenue while driving up spending.

“Despite the larger-than-expected deficit (for April) we believe the overall budget picture is improving along with the strengthening economy,” economists at Nomura Global Economics said in a research note.

Analysts estimate that roughly one-third of the increase in the deficits over the past two years came from lost revenue — the result of fewer people working and lower corporate profits. The other two-thirds is from added government spending to stem the recession and aid the recovery. That includes the $787 billion stimulus bill and the $700 billion financial bailout.

 

Copy the Story Link