Uncle Sam won't make ends meet
The IRS will bring in a lot of cash this week, but not nearly enough to foot the government's bill this year.
NEW YORK (CNNMoney.com) -- For Uncle Sam, Wednesday is a big payday. But what the government rakes in on April 15 - and throughout the year - won't be enough to cover its expenses.
Federal coffers are much less flush than they were last year as tax receipts have fallen sharply because of the economic downturn.
As of March - or halfway through fiscal year 2009 - federal tax revenue is 14% lower than last year, the Congressional Budget Office recently reported.
In dollars and cents terms, that means Washington has $160 billion less to spend today than it did a year ago. All the while, the demands on the government to fund the country's way out of recession are on a steep trajectory north.
"Receipts from almost all sources declined, reflecting the continuing effects of the recession and recently enacted legislation," the CBO noted in its monthly budget review.
The economic crisis is showing up in the government's profit-loss statement in myriad ways.
Considerably more people are out of work than they were last year - which means they're not paying as much in income taxes. Corporate earnings have taken a beating, which means less taxable green coming in from that corner. And refunds have increased for individuals and corporations alike. All told, individual income tax receipts dropped 15% while those for businesses fell a whopping 57%.
In addition, revenue from miscellaneous taxes and fees has fallen by $10 billion, or 12%. The CBO attributes that decline in part to losses in the Federal Reserve portfolio of assets, in particular a $3 billion drop in market value of the corporation set up last year to smooth the takeover of investment bank Bear Stearns by JPMorgan Chase (JPM, Fortune 500).
At the same time, the country's spending levels midway through the fiscal year rose by $480 billion, or 33 percent, compared to last March. The jump is due in large part to the government's funding of the Troubled Asset Relief Program as well as Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). There were also significant increases in how much the federal government spent on Medicaid (up 17%) and "other activities" (up 21%) such as providing unemployment benefits.
Spending also rose - although modestly by comparison - for defense, which accounts for roughly 20% of the total federal budget; and for Social Security benefits, which account for another fifth of the budget.
Of course, this is hardly the first year Uncle Sam has taken in less than he will have to pay out. In fact, that's been the case for all but five of the past 40 years, according to CBO data.
The difference this year is that the spending demands on the federal government have grown in historic ways. In fact, the CBO estimates that the annual deficit will spike to between $1.67 trillion and $1.85 trillion. That's nearly four times last year's then-record $455 billion deficit.
Over the next few weeks, President Obama will submit his most detailed budget proposal to date as lawmakers in the House and Senate try to reconcile their own versions of the 2010 fiscal plan.
But for the keepers of federal tax revenue, it's a safe bet that next year is likely to be déjà vu all over again. The budget proposals on the table all exceed $3.5 trillion. And given the state of the economy, no one is proposing to raise taxes in 2010.