WASHINGTON - The federal government registered a record budget deficit for November, reflecting the effect of a recession on tax receipts and the mounting costs of the $700 billion financial-rescue program.
The country remains on track to hit a record deficit of $1 trillion or more for the entire year, which would be more than double the previous all-time high, set last year.
The Treasury Department said yesterday that the gap between the government's revenue collections and what it paid out last month totaled $164.4 billion, the largest deficit ever recorded for a November.
In just the first two months of this budget year, the deficit now totals $401.6 billion. A deficit of $1 trillion for the year would set a record high in dollar terms and would be the largest as a percentage of the overall economy since World War II.
A $1 trillion gap would equal 6.7 percent of the gross domestic product, the economy's total output in a single year. That would surpass the previous postwar high of 6 percent in GDP terms set in 1983, when Ronald Reagan was president.
Some economists say they think estimates of a $1 trillion deficit for this year are too low. David Rosenberg, North American economist at Merrill Lynch & Co. Inc., projected that it could reach $1.5 trillion, depending on how large a stimulus package is approved next year.
While the November deficit was slightly lower than the $172.5 billion economists had been expecting, the total for the last two months is well above any deficit recorded in a similar two-month period.
The deficit is being driven higher by the $700 billion rescue package Congress passed Oct. 3 to deal with the most serious financial crisis to hit the country since the 1930s.
The Treasury Department plans to use $250 billion of the $700 billion program to make direct purchases of bank stock, providing the nation's financial institutions with an infusion of cash in the hopes that they will resume more normal lending practices.
The new report showed that the government spent $76.5 billion from the rescue program in November and $191.5 billion over the last two months.
The Treasury also is buying mortgage-backed securities to bolster demand for those assets. The purchases totaled $23.2 billion in November and $44.7 billion over the last two months.
Still, even budget hawks acknowledge that now is a good time for the government to step up its borrowing. With the Treasury Department paying the lowest rates on government debt in years, taxpayers will pay less in interest on all the new debt.