Budget deficit on track to top $1 trillion
Wednesday, July 13, 2011
WASHINGTON (AP) — The federal budget deficit is on pace to break the $1 trillion mark for the third straight year, ratcheting up the pressure on the White House and Congress to reach a deal to rein in spending.
The deficit totaled $971 billion for the first nine months of the budget year, the Treasury Department said Wednesday. Three years ago, that would have been a record high for the full year.
With three months to go, this year’s deficit will likely top last year’s $1.29 trillion gap, according to the Congressional Budget Office. But it is expected to come in below the record $1.41 trillion reached in the 2009 budget year. The budget year ends Sept. 30.
For June, the deficit was $43 billion, below the $68 billion imbalance recorded in June 2010. Much of the improvement from last year was due to a one-time drop in the estimated cost of education loans.
But the government is also receiving more tax revenue this year, which reduces the deficit a bit. Revenue rose 9 percent, or $137 billion, through June, the Treasury’s report said.
That’s partly because more Americans have jobs. The economy has added 1 million jobs in the past nine months, though there are still nearly 7 million fewer jobs than before the recession.
Government spending has also risen this year. Interest on the national debt rose 9 percent to $386 billion in the first nine months of this year, compared to the same period last year, one of the largest increases in spending. Spending on Medicare, Medicaid and Social Security benefits also increased.
Soaring deficits have held up a vote to raise the nation’s $14.3 trillion borrowing limit. Republicans and President Barack Obama are at odds over a long-term plan to trim federal spending. Republicans have demanded steep spending cuts in return for voting to raise the borrowing limit. Obama and Democrats in Congress want tax increases to be part of the deal, which Republicans have adamantly opposed.
The government reached its borrowing limit in May. Treasury Secretary Timothy Geithner has warned that if the limit is not raised by Aug. 2, the country will default on its debt for the first time ever.
But negotiations between the White House and President Obama are at a standstill as the two sides meet Wednesday for their fourth negotiating session in as many days. Obama has said the daily meetings will continue until a deal is reached.
A two-hour session Tuesday produced no progress. That prompted the top Republican in the Senate to propose giving Obama sweeping new powers to increase the limit to avoid default.
Minority Leader Mitch McConnell, R-Ky., offered a plan to allow the president to demand up to $2.4 trillion in new borrowing authority by the summer of next year in three separate submissions. Those increases would automatically take effect unless both the Republican-controlled House and the Democratic-controlled Senate enacted legislation disapproving them.
Obama would be able to veto such legislation, giving him power to muscle through the debt increases.
The GOP plan would require that Obama submit spending cuts along with his borrowing requests. But unlike the increase in the borrowing limit, they wouldn’t automatically take effect.
The government last recorded a budget surplus in 2001, when revenues were $127 billion greater than spending. The surpluses were expected to total $5.6 trillion over the next decade.
But the country was back in the red by 2002. The deficit grew after President Bush won approval for broad tax cuts and launched the invasions of Iraq and Afghanistan.
In 2008, Bush’s last full year in office, the deficit reached $454.8 billion, a record at that time. And when the economy plunged into a deep recession, the yearly imbalance topped $1 trillion.
Higher spending on unemployment insurance and food stamps, and a sharp contraction in tax revenues, widened the deficit. And it grew even more after the Obama administration backed a $787 billion stimulus program to boost the economy.
The deficit also worsened after Obama and congressional Republicans agreed to extend Bush’s tax cuts for two more years.