Federal deficit shows improvement for first half of fiscal 2010

The federal deficit improved slightly during the first six months of fiscal 2010, amounting to $714 billion, $67 billion less than the 2009 shortfall, according to the latest figures released by the Congressional Budget Office. 

But spending on entitlement programs, including unemployment insurance rose significantly as the jobless rate hovered around 10 percent and the economy was still slow to add jobs. 

Spending on unemployment insurance increased by $39 billion or 83 percent because of those high unemployment levels and the extension of benefits for the long-term unemployed. In addition, Medicaid spending rose by $17 billion, Social Security was up by $23 billion and Medicare spending was up by $12 billion. 

Deficit numbers were brighter behind a $223 billion decrease in spending for the Troubled Asset Program, from $115 billion in spending during the first six months of last year and $109 billion in receipts so far this year, CBO Director Doug Elmendorf wrote on his blog. The amount is negative this year because the Treasury is expected to report a reduction of $114 billion in outlays for TARP in March, "reflecting a significant decline in its estimate of the net costs that will ultimately result from that program's transactions."

Revenue during the period was $37 billion lower than 2009 because of a $45 billion decline in payroll taxes due to lower wages. Corporate income tax payments were about 5 percent less. 

With tax day later this week, the next month or so should provide insight into receipts for 2010. 

The smaller deficit also was caused by a $69 billion decline in spending on federal deposit insurance. Spending on government-controlled mortgage lenders Fannie Mae and Freddie Mac decreased by $34 billion during the past six months.