WASHINGTON - The U.S. budget deficit almost hit $1 trillion during the first six months of this fiscal year which began on October 1, according to estimates released on Monday by the Congressional Budget Office.
The government likely recorded $953 billion in red ink from October through March including $290 billion for the Troubled Asset Relief Program, or TARP, which was to provide much-needed cash to struggling financial institutions, the CBO said.
Receipts during the six-month period dropped about $160 billion, or 14 percent, over the same period in fiscal 2008. Nearly half of the drop, $73 billion, came from a fall in corporate income tax receipts.
The CBO, the nonpartisan budget analyst for Congress, said the drop in corporate receipts was the largest in more than three decades.
In comparison, the federal deficit for the first six months of fiscal 2008 was $313 billion, roughly a third of the estimated current total.
More red ink is expected to pile up this fiscal year, with CBO projecting the deficit could total more than $1.8 trillion -- by far a record. CBO has forecast the deficit would drop a bit in fiscal 2010, to nearly $1.4 trillion.
In addition to dropping revenue and the bailout money for Wall Street, the government has poured more money out the door to try to jump-start the ailing economy, which has been in recession since December 2007.
Congress approved a $787 billion stimulus package in February and most of the funds are expected to hit the street this year and 2010 through tax breaks as well as spending on infrastructure and other projects.
President Barack Obama proposed a $3.55 trillion budget for fiscal 2010, but his fellow Democrats in Congress are trying to trim it to avoid increasing the deficit more. Republicans have complained the budget had too much spending and tax increases.
Washington could recoup some of its investments in financial firms and the CBO calculated the potential cost of the program in a couple of ways. Using an alternate approach, the CBO estimated government outlays under TARP at $140 billion through March, leading to an estimated U.S. budget deficit of $803 billion through January.
The CBO also said $46 billion in federal aid was given in March to Fannie Mae and Freddie Mac, the U.S. mortgage financing companies that were taken over by the government. A total of $60 billion has been paid to the two firms during the six-month period.
An arm of the U.S. Treasury Department also loaned $10 billion to credit unions to help them address recent liquidity pressures, the CBO said.
Net interest on the public debt for the first half of fiscal 2009 did drop compared to the same period a year ago, falling some 35 percent to $84 billion through March compared to $129 billion in the first half of fiscal 2008.