US budget deficit swells after financial bailout

WASHINGTON: Just one month into the fiscal year, the US federal budget deficit already has reached $232 billion, according to estimates released on Friday.

That is how the deficit would look as measured by the Treasury Department, the rival Congressional Budget Office said. Treasury is going to put the $115 billion in bank stock purchases made as part of the bailout of the financial system last month directly onto the deficit ledger.

By some estimates, the deficit could even double from the record $455 billion posted last month, after the costs of the bailout, additional stimulus legislation, and the impact of slumping revenues are factored in.

For its part, CBO counts the bailout cost so far at $17 billion, which represents the ``present value'' of the money. Basically, that accounts for market risk and represents the amount this portion of the bailout will cost the government in the end after it recoups its investment in bank stocks.

The new estimate comes as most economists say the economy is in a recession that could become the deepest in decades. It also puts the government on course to run a record deficit for the 2009 budget year, which began October 1.

Ominously, income and payroll tax revenues for the month fell compared to October 2007. Corporate income tax receipts fell by $5 billion.

Outside of the spending for the bailout, the deficit rose by $60 billion over last year, CBO predicts. But once the bailout is included, the deficit swells by $175 billion under Treasury's accounting methods.