WASHINGTON — The federal budget deficit rose to $150.4 billion last month, the largest November gap on record. And the government's deficits are set to climb if Congress passes a tax-cut plan that's estimated to cost $855 billion over two years.
The Treasury Department says November's budget gap was 25 percent more than the deficit in November 2009.
For the first two months of the current budget year, which began Oct. 1, the deficit totals $290.8 billion. That's 2 percent less than for the same period a year ago. Economists had been estimating that the full-year deficit would decline after two years of record highs.
But analysts say the tax deal President Barack Obama reached with Republicans this week will give the 2011 budget year the largest deficit in history — $1.5 trillion, according to economists at JPMorgan Chase — and would mark the third straight year of trillion-dollar-plus deficits.
Under the tax cut plan, JPMorgan economist Michael Feroli said he expects a $1.5 trillion deficit this year to be followed by a $1.2 trillion gap in 2012.
While many economists expected the Bush-era tax cuts would be extended and reflected that in their deficit forecasts for coming years, they had not factored in other parts of the tax-cut package including a 2-percentage-point reduction in the Social Security payroll tax for next year, taking the tax for individuals from 6.2 percent to 4.2 percent, at a cost to the government of $112 billion over the next year.
Before the tax cut agreement, many private economists were forecasting that the deficits would start to slowly fall in coming years. The major Wall Street firms that serve as primary dealers for the government's debt auctions projected last month that the 2011 deficit will dip to $1.21 trillion and decline further to $1.02 trillion in 2012.
The 2009 deficit is the current all-time high, at $1.42 trillion. The second-highest deficit ever is the $1.29 trillion deficit for the 2010 budget year, which ended Sept. 30.
Economists do expect the tax cut package, which the Senate is expected to begin voting on Monday, to boost economic growth.