In November, the Trade Deficit rose to $45.75 billion from $43.27 billion in October. For the first 11 months of 2011 it was 512.78 billion up from 459.57 billion. A complete breakdown of the trade deficit numbers should be up shortly on the regular analysts blog..

Yesterday, we learned that the Budget Deficit for December rose to $86.0 billion from $78.1 billion a year ago (the budget deficit data are highly seasonal, but not seasonally adjusted, so month to month comparisons are worse than useless, they are highly misleading). In the first three months of fiscal 2012 (started October 1, 2011) The budget deficit is actually down 12.8% to $321.74 billion versus the first three months of fiscal 2011. In December, revenues were $329.96 billion versus $236.88 billion while spending rose to $325.93 billion from 315.01 billion last year. On a year to date basis, tax revenues are up 4.44% to $555.44 billion. Spending is down 2.62% to $877.17 billion. The rise in revenues was driven by a 5.6% increase in individual income tax collections, and a massive 54.8% increase in corporate income taxes. Individual income taxes are still almost five times larger than corporate income taxes though.

The spending reductions were biggest at Health and Human Services, which spent $27.99 billion less in the first three months of fiscal 2012 than it did in fiscal 2011, followed by a $15.51 billion decline in Pentagon spending. The Department of Labor spent $9.05 less so far this year than last year. On a percentage basis, the decline was biggest at the DOL, down 25.0% from last year’s pace.

The budget deficit got most of the attention last year, especially during the summer with the Debt ceiling fiasco. Surprisingly, neither the increase yesterday, nor the sharp decreases in the previous two months attracted much press attention. The budget deficit is responsible for the growth of the overall national debt. However, it is the trade deficit that is responsible for our being in debt to the rest of the world.

Which do you see as being the bigger economic problem at this time? I would argue that over the short to medium term, the Trade Deficit is more important, since it represents just about a direct dollar for dollar reduction in GDP. In a deep economic slump it is useful to be running a budget deficit.

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