The U.S. government budget deficit widened in May, as spending jumped 31.3 percent from the same month a year ago.
The deficit expanded to $124.6 billion from a $57.6 billion shortfall in May 2011, according to Treasury Department data released today in Washington. The shortfall matches a projected a $125 billion deficit, according to the median estimate in a Bloomberg News survey.
The U.S. government risks a fiscal crisis unless it makes significant changes in tax and spending policies, the Congressional Budget Office said June 5. The non-partisan agency said that without policy changes, the national debt within 15 years will top the historical peak set after World War II. In 1946, government debt amounted to 109 percent of the economy.
“I am sure there will be brinksmanship and possibly even some investor panic, but in the end, everything will work out,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “Having said that, Washington had better get it right in 2013, as next year may well be the last chance to get our fiscal house in order on our own terms.”
Revenue rose by 3.3 percent in May from a year earlier to $180.7 billion from $174.9 billion, and spending rose to $305.3 billion from $232.6 billion.
In the first eight months of the fiscal year that began in October, the budget deficit narrowed to $844.5 billion from $927.4 billion in the same period last year.
A so-called fiscal cliff is coming at the end of 2012 when a number of major tax-and-spending changes will take effect unless Congress acts. The George W. Bush-era income tax cuts will expire as will a temporary cut in the Social Security payroll tax. About $1 trillion in automatic spending cuts will be poised to start, expanded jobless benefits will expire and the government will approach the legal limit on federal borrowing.
Individual income tax receipts in the first eight months of this fiscal year rose to $731.3 billion from $701.9 billion in the same period last year. Corporate income tax receipts rose to $119.1 billion from $85.5 billion.
U.S. stocks rose, rebounding from yesterday’s slump, amid optimism the Federal Reserve will stimulate the economy.
The Standard & Poor’s 500 Index gained 0.6 percent to 1,316.38 at 2:16 p.m. New York time after briefly erasing gains following Fitch Ratings’ downgrade of 18 Spanish banks. It fell 1.3 percent yesterday. The Dow Jones Industrial Average added 99.15 points, or 0.8 percent, to 12,510.38 today.
U.S. lawmakers are waiting for the outcome of the November election before deciding what to do about the fiscal changes, in hopes that voters will give them a stronger hand in negotiations.
“If politicians fail again next year to get their hands around the problem, markets are likely to begin losing patience, as has been the case in Europe,” Stanley said by e-mail before today’s report.
Estimates of the May budget gap ranged from $30 billion to $130 billion in the Bloomberg survey of 25 economists.
The Congressional Budget Office estimated last week the May deficit would be $125 billion. The CBO said in a report dated June 7 that the results were influenced by the shift of certain payments from May to April.
--With assistance from Brian Faler and Kristy Scheuble in Washington. Editor: Kevin Costelloe
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