Budget office puts fiscal 2010 deficit at $1.3 trillion

The Congressional Budget Office Thursday put the budget deficit for fiscal 2010 at about $1.3 trillion, or 8.9 percent of the gross domestic product -- the second highest shortfall as a share of the economy since 1945.

The $1.3 trillion figure was $125 billion less than the $1.4 trillion shortfall recorded in fiscal 2009 when the deficit hit 10 percent of GDP, according to CBO.

The deficit estimate came in CBO's monthly budget review, which looked at data for September and the entire fiscal year that ended Sept. 30. Fiscal Year 2011 began Oct. 1.

Outlays in fiscal 2010 declined by $67 billion, and revenues increased by $57 billion.

CBO estimated that total tax receipts rose by 3 percent in fiscal 2010, following declines in each of the prior two years.

Corporate income tax receipts rose by $53 billion in 2010, which CBO attributed to improved economic conditions, as well as the expiration of legislation that allowed taxpayers to take higher depreciation charges in 2009, which has resulted in higher taxable profits in 2010.

A small business jobs measure -- which became law in late September -- that extended through tax year 2010 the allowance for higher depreciation charges is expected to reduce revenues in fiscal 2011.

Those increases in corporate tax receipts were partially offset by a drop in the total of individual income and payroll taxes, which were about $43 billion lower than those receipts in 2009.

That $67 billion decline in outlays resulted primarily from a net reduction in three items related to the financial crisis: the cost of the Troubled Assets Relief Program, which was $262 billion lower than in 2009; payments to Fannie Mae and Freddie Mac, which saw a $51 billion decrease; and federal deposit insurance, which declined $55 billion. "Excluding those three programs, spending rose by about 9 percent in 2010, somewhat faster than in recent years," CBO said.