Best Financial Markets Analysis Article The cumulative budget deficit of the federal government for the twelve months ended December 2010 stood at $1.277 trillion, down from a high of $1.478 trillion in the twelve months ended February 2010.

The smaller budget deficit is a result of an increase in receipts and a decline in outlays of the federal government. As shown in chart 2, outlays of the federal government have declined for six consecutive months.

Personal income and corporate income tax receipts have advanced in recent months. Income tax receipts during the latest 12-month period is up 7.5% from the low in the twelve months ended January 2010, while corporate tax receipts have risen nearly 31% in the same period (see Chart 3).

Fiscal stimulus of $799 billion known as "The American Recovery and Reinvestment Act of 2009" will expire shortly. According to Propublica.org, nearly 9.0% of proposed spending and 15.6% of tax cuts (about $45 billion) are left to be implemented. Roughly 25% of the planned spending has been committed but not paid out as yet (see Chart 4). The Obama-McConnell tax compromise and the Fed's $600 billion purchases of Treasury securities are in place to support the recovery, implying that the U.S. economy is still on artificial support.

Source: http://projects.propublica.org/tables/stimulus-spending-progress

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com

Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

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