The federal government began the new budget year with a record deficit of $237.2 billion, reflecting the billions of dollars the government has started to pay out to rescue the financial system.
The Treasury Department said today that the deficit for the first month in the new budget year was the highest monthly imbalance on record. It was far bigger than analysts expected, over four times larger than the October 2007 deficit of $56.8 billion, and more than half the total for all of last year.
The big surge reflected the government spending $115 billion to buy stock in the nation’s largest banks. Those were the first payments made from the $700 billion government rescue program passed by Congress to deal with the most severe financial crisis to hit the country since the 1930s.
The October deficit began a period in which economists are forecasting the red ink for the entire year could well hit $1 trillion, reflecting what many expect to be a severe recession, which will depress tax revenue, and the heavy costs of the financial system bailout.
President-elect Barack Obama has said that getting the economy back on track will be his top priority and has promised to work with Congress to pass a second stimulus program.
The $237.2 billion deficit for October included total government spending of $402 billion, a record in terms of outlays. (AP)
