The United States set two budget records in April. First, the $82.7 billion monthly budget deficit was the highest ever for that month. Second, it was our 19th consecutive monthly deficit, the longest streak of red ink on the books.
You could turn this headline into yet another attack on the administration's spending policies.* But that doesn't provide a very complete picture. Once more, the overwhelming majority of government spending increases in 2009 and 2010 were automatic and mandated by law, or passed as emergency relief under President Bush. Even the $158 billion spent under Obama's Recovery Act in 2009 was largely to help states pay for existing services: the Medicaid Federal Medical Assistance Percentage (FMAP) and the State Fiscal Stabilization Fund (SFSF). The other side of the coin is taxes, because deficits are the difference between spending and revenue. Tax revenue as a percentage of personal income has fallen to 1950s levels.
The Congressional Budget Office correctly projected an $80 billion loss in April and put it in context. We're running about even with fiscal year 2009 -- $800 billion in the red after seven months. Tax revenues are down four percent, because of lower salaries and the Making Work Pay credit in the Recovery Act. That's one big reason why April, which usually sees a budget surplus with new federal income tax revenue, instead saw a record deficit.
But this might surprise you: government spending is down about three percent, too. Relief efforts like the bank bailout plan have eased significantly, offsetting increased spending on jobless benefits, tax credits, and the federal government picking up a larger portion of the states' Medicaid burden.
* You might ask: if spending is on par with 2009, why did we have a record April? Some of it is accounting: "Certain payments were shifted into April this year because May 1 fell on a weekend, boosting outlays in April by $25 billion." The CBO also said outlays increased by $4 billion for defense, $3 billion for education, and $2 billion for Social Security benefits and the Federal Deposit Insurance Corporation.
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