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Monday, April 12, 2010

Treasury Budget and Reliance on the Private Sector

The AP details:

The budget deficit for March showed a dramatic decline as the Obama administration formally entered a lower ultimate cost for the government's $700 billion financial bailout program.

The Treasury Department said the deficit for March totaled $65.4 billion, compared to a $191.6 billion imbalance a year ago. However, $115 billion of that improvement occurred because the administration lowered its estimate of the total costs for the Troubled Asset Relief Program.

Even with the change, the administration is still projecting that the budget deficit for the entire year will surpass last year's all-time high of $1.4 trillion.
The below chart shows the year over year change in receipts and outlays. This is where things will be interesting to watch. On one hand you have receipts leveling and possibly beginning to grow (a good thing) while on the other hand you have government spending no longer being a "stimulus" to further growth.



In a nutshell... this is where private demand needs to take over for further recovery. While recent data has shown relative strength in the private sector, that strength will be even more important going forward as the public sector will no longer be relied upon for marginal demand.

Source: Treasury