Federal Budget Deficit Hits April Record

The U.S Federal budget deficit last month reached $82.7 billion, the highest amount ever recorded for the month of April. This is up drastically from last years April deficit of only $20 billion. According to the Associated Press, the number was above the $30 billion deficit private economists had been forecasting.

The government normally runs surpluses in April as millions of taxpayers file their income tax returns. However, income tax payments were down this April, reflecting the impact of a severe recession which has pushed millions of people out of work.

IRS Tax Revenue Falls Along With Taxpayers' Income

As I discussed on the FOX Business Network, the IRS recently saw it’s largest revenue drop in over 30 years. You can watch my appearance here, but USA Today also posted an interesting article on the same subject. You can find a snippet of their article below, or check out the full post here.

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Research says.

When the economy slumps, so does tax revenue, and this recession has been no different, says Kerry Lynch, senior fellow at the AIER and author of the study. "It illustrates how severe the recession has been."

For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago.

"These are staggering numbers," Lynch says.

Big revenue losses mean that the U.S. budget deficit may be larger than predicted this year and in future years

"It's one of the drivers of the ongoing expansion of the federal budget deficit," says John Lonski, chief economist for Moody's Investors Service. The Congressional Budget Office projects a $1.7 trillion budget deficit for fiscal year 2009.

The other deficit driver is government spending, which, the AIER's report says, is the main culprit for the federal budget deficit.

The White House thinks that tax revenue will increase in 2011, thanks in part to the stimulus package, says the report from AIER, an independent economic research institute. But it warns, "Even if that does happen, the administration also projects that government spending will be so much higher each year that large deficits will continue, and the national debt held by the public will double over the next 10 years."

The government may have a hard time trimming spending to reduce the deficit when the recession ends. The 77 million Baby Boomers— those born in 1946 through 1964 — will start tapping their federal retirement benefits soon, which means increased government outlays for Social Security and Medicare.

Federal Tax Revenue Drops

As I mentioned yesterday, I made a guest appearance on FOX Business Network’s Money for Breakfast to discuss the biggest tax revenue drop in 30 years. Check out the embedded video of my interview below.

Television Appearance Tomorrow Morning!

I'm going to be a guest on FOX Business News tomorrow morning at 4:30 AM PST. The topic is going to be declining federal tax revenues, so be sure to tune in!