U.S. budget gap grows to $569 billion
Treasury Department says federal budget deficit increased by $84 billion last month.
NEW YORK (CNNMoney.com) -- The Treasury Department said Wednesday that the federal budget deficit grew by $83.8 billion in January, bringing the total deficit for the first four months of the fiscal year to $569 billion.
By comparison, the Treasury ran a cumulative surplus of $89 billion during the first four months of fiscal 2008. So far this fiscal year, which began in October, the 2009 deficit has already exceeded the $455 billion deficit for all of fiscal 2008.
January's deficit was slightly larger than December's $83.6 billion shortfall, and is nearly five times the $17.8 billion deficit recorded in Jan. 2008.
The deficit has increased dramatically in recent months as the government has spent billions to shore up the nation's shaky financial system. At the same time, tax receipts have dwindled as the recession drags on and unemployment rises.
Treasury has collected $773 billion in taxes so far this fiscal year, down 10% from $861 billion in the first four months of last year.
Revenues from individual income taxes totaled $124.4 billion in January, down 70% from year-ago levels, while corporate taxes were down 95% to $4.5 billion.
Economists expect the deficit to continue expanding throughout the year. Last week, the Congressional Budget Office said it expects the deficit to balloon to $1.2 trillion for all of fiscal 2009.
Meanwhile, lawmakers in the House and Senate hammered out an agreement on a $789 billion stimulus plan Wednesday, which could add even more to the deficit if President Obama signs the bill into law.
The stimulus news comes one day after Treasury Secretary Tim Geithner outlined the Obama administration's plan to spend the second half of the $700 billion allocated under the Treasury's Troubled Asset Relief Program.
"These are huge numbers," said Bernard Baumohl, chief global economist at The Economic Outlook Group, an advisory firm based in Princeton, N.J.
The swelling deficit raises serious questions about the government's ability to find buyers for its debt and could jeopardize the nation's credit rating, he said.
Economic weakness overseas means the government could have trouble finding buyers for the massive amounts of debt it will need to sell to finance the stimulus and bailout plans, Baumohl said.
"They're having their own problems overseas," he said. "The foreign capital may not be there."
While there is no sign of this yet, a weakening of demand for U.S. debt would force the government to entice investors by offering more attractive yields, which would work against an economic recovery, Baumohl said.
Still, most economists say expanding the deficit is unavoidable in the short term to cope with the recession and stabilize the financial system.
"We need to have deficits for now to help pay for the economic recovery," Baumohl said. 
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