Deficit rose in February, on pace to top $1T again
WASHINGTON (AP) — The U.S. federal deficit was slightly smaller through the first five months of the budget year than the previous year. Still, the imbalance is on pace to exceed $1 trillion for the fourth straight year, which could be an issue in this year's presidential election.
The Treasury Department said Monday that the deficit grew by $232 billion in February. That increased the imbalance through the first five months of the budget year to $581 billion, or 9 percent less than the same period in fiscal 2011.
The Obama administration expects the deficit will reach $1.3 trillion when the budget year ends on Sept. 30. That would nearly match last year's gap. The government ran a record deficit of $1.41 trillion in 2009 and a $1.29 trillion gap in 2010.
The deficit was slightly lower at the start of the year in part because the government took in more taxes from corporations.
And the gap was smaller even after the government paid out more money in February in tax refunds. February is typically a big month for refunds. This year's payout was 50 percent higher than last year's, partly because of the leap year.
The rapid growth in annual deficits has drawn public outrage and heightened partisan debate in Congress over spending and taxes. Growing deficits have pushed the federal debt to a record $15.5 trillion.
Republicans are making the deficit a key election-year issue.
The government last recorded a surplus in 2001. The deficits grew again after President George W. Bush won approval for broad tax cuts, pushed a major drug benefit program for seniors and launched the invasions of Iraq and Afghanistan.
The deficit reached a then-record of $458 billion during Bush's last year in office.
The imbalance grew even further during President Barack Obama's administration. Tax revenues plummeted during the recession, as unemployment soared and corporate profits fell. The Obama administration also stepped up spending, adopting a roughly $800 billion stimulus program.
The deficit surpassed $1 trillion for the first time ever in 2009 and hasn't been below that level since.
Congress and the White House have struggled to agree on changes to tax levels or spending programs that would curb the deficit. They will face another big challenge at the end of this year, when tax cuts enacted by the Bush administration in 2001 and 2003 are set to expire. And a set of automatic spending cuts totaling about $1.2 trillion over 10 years is also scheduled to kick in.
Those changes would substantially reduce the deficit in future years. But the CBO estimates that if Congress extends the tax cuts, as they have in the past, and if they block the spending cuts, the deficit will remain near $900 billion or higher for the next 10 years.