By Mark Felsenthal
WASHINGTON, Feb 10 (Reuters) - The U.S. budget deficit widened less than expected in January but was still the second-highest on record for the month, underscoring the liability it has become for the Obama administration.
The gap broadened to $49.80 billion, held back in part by a rise in tax receipts, the Treasury Department said. Analysts polled by Reuters were expecting a $70 billion shortfall.
The deficit for the fiscal year to date narrowed to $419 billion from $431 billion but is expected to expand as the effects of payroll and business tax cuts kick in.
The budget hole is a hot button political issue with newly empowered congressional Republicans pushing for steep spending cuts while many Democrats argue the government should not withdraw support from the shaky recovery prematurely.
In a sign there may be a silver lining to the fiscal picture, revenue gains came from both individual and corporate receipts.
'This trend has persisted steadily over the past few quarters and reflects the positive effects of the economic recovery on income,' Theresa Chen, an economist for Barclays Capital, wrote in a note to clients.
Concern about the growing U.S. deficit has taken on new urgency after a series of sovereign debt crises in Europe and elsewhere fueled a movement toward painful fiscal austerity initiatives in nations around the globe.
President Barack Obama is due to unveil his budget proposal on Monday. He will be under pressure to show how he plans to tackle a budget deficit estimated at $1.48 trillion in fiscal 2011 -- or 9.8 percent of the U.S. economy -- that is adding to the towering national debt.
House of Representatives Republicans on Thursday pledged to cut nearly $58 billion from current spending levels. They acknowledge such cuts could force airport closures, layoffs at the FBI and other harsh disruptions.
The Treasury said receipts in January rose 10 percent to $227 billion. However, outlays rose 11 percent to $276 billion.
'In the near term, this pattern of increasing revenues but still elevated outlays will likely persist,' Chen said.
The rise in outlays was amplified by calendar factors that last year pushed some January benefits payments into December 2009, Treasury officials said.
With the deficit expected to widen in 2011 and 2012 -- due largely to the December extension of George W. Bush-era tax cuts -- there is a risk of a damaging stand-off between Republicans and Obama's Democrats that produces little concrete action on the shortfall.
Election wins in November by Republicans backed by the conservative Tea Party movement have brought new members to the House who campaigned aggressively for spending cuts and smaller government.
Federal Reserve Chairman Ben Bernanke told the House budget panel on Wednesday that draconian short-term budget cuts alone could set back the sluggish economic recovery and recommended lawmakers draft a plan for fiscal discipline over 10 years.
(Editing by James Dalgleish and Andrew Hay) Keywords: USA ECONOMY/BUDGET (mark.felsenthal@thomsonreuters.com; Tel: +1 202 898 8329; Reuters Messaging: mark.felsenthal.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, Feb 10 (Reuters) - The U.S. budget deficit widened less than expected in January but was still the second-highest on record for the month, underscoring the liability it has become for the Obama administration.
The gap broadened to $49.80 billion, held back in part by a rise in tax receipts, the Treasury Department said. Analysts polled by Reuters were expecting a $70 billion shortfall.
The deficit for the fiscal year to date narrowed to $419 billion from $431 billion but is expected to expand as the effects of payroll and business tax cuts kick in.
The budget hole is a hot button political issue with newly empowered congressional Republicans pushing for steep spending cuts while many Democrats argue the government should not withdraw support from the shaky recovery prematurely.
In a sign there may be a silver lining to the fiscal picture, revenue gains came from both individual and corporate receipts.
'This trend has persisted steadily over the past few quarters and reflects the positive effects of the economic recovery on income,' Theresa Chen, an economist for Barclays Capital, wrote in a note to clients.
Concern about the growing U.S. deficit has taken on new urgency after a series of sovereign debt crises in Europe and elsewhere fueled a movement toward painful fiscal austerity initiatives in nations around the globe.
President Barack Obama is due to unveil his budget proposal on Monday. He will be under pressure to show how he plans to tackle a budget deficit estimated at $1.48 trillion in fiscal 2011 -- or 9.8 percent of the U.S. economy -- that is adding to the towering national debt.
House of Representatives Republicans on Thursday pledged to cut nearly $58 billion from current spending levels. They acknowledge such cuts could force airport closures, layoffs at the FBI and other harsh disruptions.
The Treasury said receipts in January rose 10 percent to $227 billion. However, outlays rose 11 percent to $276 billion.
'In the near term, this pattern of increasing revenues but still elevated outlays will likely persist,' Chen said.
The rise in outlays was amplified by calendar factors that last year pushed some January benefits payments into December 2009, Treasury officials said.
With the deficit expected to widen in 2011 and 2012 -- due largely to the December extension of George W. Bush-era tax cuts -- there is a risk of a damaging stand-off between Republicans and Obama's Democrats that produces little concrete action on the shortfall.
Election wins in November by Republicans backed by the conservative Tea Party movement have brought new members to the House who campaigned aggressively for spending cuts and smaller government.
Federal Reserve Chairman Ben Bernanke told the House budget panel on Wednesday that draconian short-term budget cuts alone could set back the sluggish economic recovery and recommended lawmakers draft a plan for fiscal discipline over 10 years.
(Editing by James Dalgleish and Andrew Hay) Keywords: USA ECONOMY/BUDGET (mark.felsenthal@thomsonreuters.com; Tel: +1 202 898 8329; Reuters Messaging: mark.felsenthal.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.