Monthly U.S. Debt Hits a New Record

Mixed news for the U.S. economy Wednesday, as the nation's monthly budget deficit hit a record $220.9. billion in February, the U.S. Treasury Department announced.

Although a record amount, it was lower than expected by analysts. Equally significant, revenue in February rose 23% to $107.5 billion -- the first year-over-year revenue increase since April 2008.

Economists surveyed by Bloomberg News had expected the U.S. government to post a $223.0 billion deficit in February, following a revised $42.6 billion deficit in January and a $91.4 billion deficit in December. The federal government ran a $193.9 billion deficit a year ago, in February 2009. It also posted a record $1.42 trillion deficit in fiscal 2009, following a $454.8 billion deficit in fiscal 2008. The $1.42 trillion 2009 deficit was nearly three times the 2008 deficit due mainly to the bank bailout and $787 billion fiscal stimulus package.

In February, revenue, jumped 23.1% to $107.5 billion from $87.3 billion in February 2009. Meanwhile, spending increased 16.8% to $328.4 billion, from $281.2 billion in February 2009.

February's 9.3% year-over-year revenue increase, the first monthly increase in about two years, represents a substantial improvement over January's 9.3% year-over-year decline.

The Obama administration forecasts a $1.41 trillion deficit for this year, fiscal 2010 (which began October 1, 2009) and a $1.6 trillion deficit for next year, fiscal 2011.

The U.S. government last ran a surplus during fiscal year 2001, posting a surplus of $128 billion in the last year of the Clinton administration. In the first year of the George W. Bush administration, Congress passed a roughly $1.1 trillion tax cut which immediately created a $200 billion structural deficit. Increased spending for the Iraq and Afghanistan wars, the war on terror programs, and the senior citizen prescription program increased the annual deficit to about $350 billion.

Revenue Uptrend In Sight?

The key take-a-away from the February report? Obviously, the smaller-than-expected monthly deficit is encouraging, but the real standout line item is revenue: it jumped an impressive 23%.

While investors should keep in mind that it's only one month's data, and revenues can easily retrench in the months ahead, the data point suggests that tax revenue has bottomed and is showing signs of growth -- a phenomenon consistent with a healing economy and an increase in commercial activity.
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