U.S. budget gap grows to $764.5 billion

NEW YORK (CNNMoney.com) -- The government said Wednesday the federal budget deficit for the first five months of fiscal 2009 surged to $764.5 billion, more than $300 billion above the gap for all of the prior year.

The Treasury Department said the federal budget deficit grew by $192.8 billion in February, according to the report released Wednesday.

Economists were expecting the budget deficit to grow by $205 billion in February, according to a consensus estimate compiled by Briefing.com.

In January, the government added a revised $86.5 billion to the deficit. Last February, the government added $175.6 billion to the deficit.

The deficit for the year that began in October is 68% above the $454.8 billion gap in all of fiscal 2008.

The government has been spending at a breakneck pace in recent months in an attempt to pull the economy out of recession, including various stimulus packages and numerous attempts to recapitalize the nation's banking system.

Not a shock: Given the spending program on which the government has embarked, the deficit numbers are not surprising, according to Diane Lim Rogers, chief economist for the Concord Coalition, a deficit watchdog group.

"The combination of this commitment to do a massive amount of deficit spending as stimulus, coupled with the fact that recession has taken a huge toll on our revenue base, means that deficits will be larger than we even anticipated when we started working on the recovery package," said Rogers.

Rogers said that while the government needs to be spending in the short term in order to spur a recovery, massive amounts of deficit spending are detrimental to the economy in the long term.

"These scary budget numbers in the monthly statement are intentional," said Rogers, "They are intended to look bad for a while, and that is OK - so long as we have a plan to make them look less scary once we are out of the recession."

Even as the Obama administration has been ramping up spending at a rapid pace, the new administration's longer-term plans are "deficit neutral," according to Rogers.

"We have to avoid the current level of deficit spending becoming a permanent thing because that will just feed back to the economy, and make it harder and harder to keep our economy strong in the future," said Rogers.

Spending up, revenue down: The total outlays for February were $280.1 billion ,and have totaled $1.63 trillion so far in fiscal 2009. The government has spent 32% more than the $1.23 billion spent at this point in fiscal 2008.

The government projects that total outlays for the fiscal year will be $3.94 trillion.

Meanwhile, the government has been taking in less from individuals and companies as the recession cuts into personal incomes and corporate profits.

Total receipts for February were $87.3 billion, bringing the total amount of money the government has collected so far this fiscal year to $860.9 billion. That was 11% lower than the $967.2 billion the government had received at the same time in the prior year.

The government collected $8.7 billion in individual income taxes in February. So far this year, the government has collected $388.5 billion in individual income taxes, and that is 13% less than the $446.9 billion the government collected at the same time last year.

The government collected $4.7 billion in corporate income taxes, but paid out $6.8 billion in refunds, resulting in a net decline from corporations of $2.1 billion.

So far in fiscal 2009, the government has collected $52.8 billion in corporate taxes, 46% less than the $96.9 billion collected in the first 5 months of fiscal year 2008.

With receipts lagging and spending increasing, the administration estimates the deficit for fiscal year 2009 will reach $1.75 trillion, which is 12.3% of U.S. gross domestic product. That's a record in dollar terms, and is the highest as a share of GDP since World War II.