U.S. 2004 Budget Deficit Widens to $396 Billion as of July

Aug. 11 (Bloomberg) -- The U.S. budget deficit for the first 10 months of the fiscal year widened to $396 billion, higher than the record $374 billion shortfall for all of fiscal 2003, the Treasury Department said.

The final total may be different by Sept. 30, the close of fiscal 2004, because of quarterly tax collections in September. Congressional and White House forecasts call for the annual deficit to exceed last year's.

``There's no way we're going to have less than $400 billion deficits this year and next year,'' Carl Steen, an economist at MFR Inc. in New York, said before the report.

The fiscal imbalance is an election issue for President George W. Bush and his Democratic opponent, U.S. Senator John Kerry of Massachusetts. Bush says the recession and terrorism are to blame. Kerry calls the deficit a threat to the economy and links it to Bush's $1.7 trillion in tax cuts.

The year-to-date numbers were part of a monthly budget statement for July. Expenditures exceeded receipts by $69.2 billion last month, compared with a deficit in July 2003 of $54.2 billion, the Treasury said in Washington.

The median forecast of 32 economists in a Bloomberg News survey called for a deficit of $62.5 billion last month.

Revenue rose 8.8 percent to $134.4 billion in July from a year earlier. Spending rose 15 percent last month to $203.6 billion.

August Payments in July

Revenue this fiscal year through July totaled $1.53 trillion, up from $1.48 trillion in same 10-month period of 2003. Spending for the first 10 months of fiscal 2004 totaled $1.93 trillion, up from $1.8 trillion a year earlier, the Treasury said.

The July deficit widened in part because Aug. 1 fell on a Sunday, meaning government retirement and Medicare checks for the month went out in late July.

As a result, $11 billion to $12 billion in spending that should be recorded in August went on July's budget statement, said Stephen Stanley, chief economist at RBS Greenwich Capital in Connecticut.

Individual income tax receipts in July rose 12 percent to $54.2 billion, or 45 percent of total receipts. Corporate income tax payments last month more than doubled to $4.9 billion, or 3.7 percent of total receipts.

Military spending rose 26 percent to $42.1 billion in July. Interest payments on U.S. Treasury debt securities rose 37 percent to $15.1 billion in July from a year earlier.

The Congressional Budget Office last week projected a July deficit of $66 billion, with revenue of $134 billion and spending of $200 billion. The agency forecast a fiscal 2004 deficit of $422 billion, less than the $478 billion it projected in March.

White House Forecast

The White House Office of Management and Budget on July 30 projected a fiscal 2004 deficit of $445 billion, lower than the $521 billion it predicted six months ago. The U.S. operated with budget surpluses from 1998 to 2001 before returning to deficits in 2002.

Funding a government in deficit requires the Treasury Department to sell debt in financial markets. This week, the Treasury is selling $51 billion in three-, five- and 10-year notes to help bridge the budget gap from July to September.

Critics of the Bush administration, including Kerry, have said the additional debt threatens to crowd out other investment, pushing up interest rates.

Treasury officials said they are confident that deficit projections won't mean big surprises in the supply of government debt.

``Going forward, we're in very good shape,'' Tim Bitsberger, Treasury's deputy assistant secretary for federal finance, said at a press conference in Washington Aug. 4. Should the White House forecast bear out, ``We really need to make very little changes to our issuance calendar.''

Bush and Kerry say they will halve the deficits within five years. Kerry, 60, has said he will cut loopholes in the tax code and revive rules that limit congressional spending. Bush, 58, is banking on his tax cuts to gird the economy. He has urged Congress to limit growth in non-defense spending at 1 percent next year.

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