August Budget Deficit Lower Than Expected as Revenue Rises

Investors received another slice of good news Monday about the U.S. economy: The federal budget deficit for August totaled a smaller than expected $90.5 billion thanks to rising government revenues, the Treasury Department announced.

Year over year, revenues rose 12.7% to $164.0 billion from $145.5 billion in August 2009, while spending rose 2.1% to $254.5 billion from $249.1 billion in August 2009. August's increase in revenue -- a substantial jump from July's 2.7% year-over-year rise -- also represents the fourth consecutive month that revenue increased on compared to 2009, providing further evidence that the government's "revenue recession" has ended.

Economists surveyed by Bloomberg had forecast a $95 billion deficit for August, after a $165 billion deficit in July. The U.S. government posted a $103.6 billion deficit in August 2009. For the first 11 months of this fiscal year, the deficit totaled $1.26 trillion, compared to $1.38 trillion for the same period last year.

Corporate Revenue Rises Again

Corporate revenues also continued to trend higher: In the last 11 months, corporate tax receipts were up 30.2% to $142.4 billion.

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Individual income tax revenues, weighed down by the large number of layoffs since 2007, and by tepid hiring in 2010, are not fairing as well: They were down 2.7% in the last 11 months, compared to a year ago.

The Obama administration has forecast a record $1.47 trillion deficit for the current fiscal year, which began Oct. 1, 2009. The U.S. government also posted a record $1.42 trillion deficit in fiscal 2009, following a $454.8 billion deficit in fiscal 2008.

The Congressional Budget Office has forecast a $1.34 trillion deficit for fiscal 2010 and a $1.07 trillion for fiscal 2011.

A Slowly Improving Budget and Economy

Although the 9.6% U.S. unemployment rate doesn't reflect it, August's deficit report points to a modestly improving budget picture -- one that reflects a slowly recovering U.S. economy. Higher international sales are boosting revenue and earnings for many U.S. corporations, which shows up in their increased their payments to the Treasury.

If that trend continues, corporate tax revenues will serve as a modest aid for members of Congressional in their budget-balancing task. All other factors being equal, it's easier to match spending with income during a period of rising revenue in an economic expansion than it is when conditions are the opposite.