U.S. Budget Deficit Widened to $1.42 Trillion in 2009 (Update1)

10-16-2009 • Bloomberg

The U.S. government’s annual budget deficit widened to a record $1.42 trillion as the deepest recession since the 1930s crippled tax revenue and the administration increased spending to rescue the economy.

An unemployment rate projected to exceed 10 percent may further hurt revenue, even as a recovery from the recession increases receipts from corporate taxes. The country’s lagging labor market is a central reason government and private forecasters don’t expect the deficit to narrow in the current budget year.

“Corporate and business income tax collections have fallen off a steep cliff, and the old-time ‘prime-the-pump’ budget expenditures to fight recession are hitting new records,” Christopher Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York, said before the report.