Budget deficit moves closer to $1 trillion mark
Martin Crutsinger, AP Economics
Writer, On Friday June 10, 2011, 4:29 pm EDT
WASHINGTON
(AP) -- The federal budget deficit is on pace to break the $1 trillion mark for
a third straight year. Record deficits are putting pressure on Congress and the
Obama administration to come up with a plan to rein
in government spending.
Already, the
deficit through the first eight months of this budget year is $927.4 billion,
according to the latest report from the Treasury Department released Friday.
Three years
ago that would have ranked as the highest ever for a full year. Instead, this
year's deficit will likely exceed last year's $1.29 trillion imbalance and
nearly match the $1.41 trillion record reached in 2009. The budget year ends on
Sept. 30.
For May, the
monthly deficit was $57.6 billion. That compared to $135.9 billion deficit for
the same month last year. But much of that improvement came from a $45 billion
write down in the estimated cost of the financial bailout program.
The latest
Treasury report does show that more people are working and paying taxes this
budget year, a positive sign. Government revenues have totaled $1.48 trillion
for the eight months ended in May, a 10.3 percent increase over the same
stretch in the previous budget year.
Still,
government outlays totaled $2.41 trillion through May. And one of the fastest
growing parts of the budget is the interest on the national debt. That rose
13.6 percent to total $165.3 billion.
The
government is at risk of defaulting on those debt payments. That would likely
happen if Congress fails to raise the nation's $14.3 trillion borrowing limit
by early August. A default on the debt would rattle markets and send interest
rates soaring, making mortgages and other consumer loans more expensive.
The increase
in the debt limit is being held up by Republicans, who want President Barack Obama and Democrats to
first agree to deep spending cuts equal in size.
A Washington Post-ABC News
poll showed that a large majority of Americans believe the country could suffer
serious harm if Congress fails to broaden the government's borrowing authority.
But barely half of those polled said they support such an increase.
The White
House and Democrats want to trim the deficit through spending cuts and also by
ending tax cuts for the wealthy, which were first passed when President George
W. Bush was in office and later extended by Obama.
Republicans
reject that approach, saying it amounts to a tax increase. Their plan would
focus exclusively on cutting spending. They have also proposed further tax cuts
for the wealthiest Americans.
The
government had a surplus of $127 billion in 2001, the year President Bush took
office. It was projected to run surpluses totaling $5.6 trillion over the next
decade.
But by 2002,
the country was back in the red. The deficits grew after Bush won approval for
broad tax cuts, pushed a major drug benefit program for seniors -- which wasn't
offset with revenue to pay for it -- and the invasions of Iraq and Afghanistan
were launched.
In 2008,
Bush's last full year in office, the deficit had grown to $454.8 billion, a
record at the time. And when the economy soured, it jumped into the $1
trillion-plus range.
The Bush
administration pushed a $700 billion bailout program in 2008 to rescue the
nation's banks, financial firms and automakers. The following year, the Obama administration continued the bailouts and also backed
a $787 billion stimulus program to boost the economy.
Higher
spending for unemployment insurance and food stamps, and the sharp contraction
in tax revenues, also widened the deficit. And it grew even more this year
after Obama and congressional Republicans signed off
on a deal that extended the Bush tax cuts for two years and also reduced Social
Security payroll taxes for one year.
The
estimated losses from the financial bailout have been shrinking. The
administration now projects those losses will total $48 billion, down from an
estimate of $341 billion two years ago.
http://finance.yahoo.com/news/Budget-deficit-moves-closer-apf-1021548715.html?x=0