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Conclusion:  The year-to-date U.S. budget deficit is -$290BN versus -$296BN in the same period last year.  Improvement, if you want to call it that.


On Friday, the U.S. government reported the federal budget deficit numbers for November of 2010.  As outlined in the chart below, the deficit for November 2010, the second month in the federal government’s fiscal year, was -$150.4BN, which is the worst November deficit on record and one of the worst monthly deficit numbers ever.  This was also the 26th straight monthly budget deficit.

In the year-to-date, which also includes October, we are actually running at a slightly better pace (in terms of a lower deficit) than last fiscal year.  Currently, the year-to-date deficit is -$290BN versus -$296BN last year.  On the positive side, the key mover has been individual income tax receipts, which are currently up $26.6BN year-over-year.  On the negative side of the ledger, total outlays, or government expenditures, are up $20.2BN year-over-year, or 3.5% growth from last year.

Income tax receipts being up on a comparative basis can be attributed to two factors according to the non-partisan Congressional Budget Office:

“CBO estimates that receipts in November 2010 totaled $148 billion, $14 billion (or 11 percent) more than receipts in November 2009. Individual income and payroll taxes combined rose by $15 billion (or 13 percent), largely because of an $11 billion (or 8 percent) rise in withheld taxes, the result of both the strengthening economy and the effects of an additional working day in November this year.”


Currently, the CBO’s deficit estimate for 2011 is $1,066BN, which is an estimated ~$228BN improvement from their actual reported deficit for 2010 of a $1,294BN. Obviously for this projected number to be met, we will need a dramatic narrowing of the deficit through the remaining 10-months of the fiscal year.

Per the CBO, the deficit actually narrowed from 2009 to 2010.  According to their view, the deficit was $1,416BN, or 10% of GDP in 2009, and $1,294, or 8.9% of GDP, in 2010.  In our analysis, which we have outlined in the table below, we actually look at spending on a normalized basis.  The primary driver of the normalized analysis is to add back TARP and payments to GSEs.  Under this scenario, the deficit actually grew 16% from 2009 to 2010.

U.S. Deficit Remains Ugly - 1

Despite seeing some marginal improvement year-to-date, the U.S. government deficit remains on an unsustainable and unprecedented path, which will eventually require dramatic policy action.  The good news, as David Einhorn aptly described earlier this year, is the deficit problem is no longer our grandchildren’s problem.  It is our problem.

Daryl G. Jones

Managing Director

U.S. Deficit Remains Ugly - US Deficit