Federal deficit tops $1T for 3rd straight year
WASHINGTON (AP) — The nation's budget deficit has topped $1 trillion for a third straight year, adding pressure on Congress and the White House to make more progress a long-term plan to shrink the growing imbalance.
The Treasury Department said Wednesday that the deficit through July totals $1.1 trillion. Three years ago, that would have been a record high for the full year.
This year's deficit is on pace to exceed last year's imbalance of $1.29 trillion but fall short of the record $1.41 trillion set in 2009.
For the first 10 months of the budget year, spending has risen 2.4 percent while revenue has climbed 8 percent. That's a sign that more people are working and paying taxes, although unemployment remains high at 9.1 percent.
Record deficits have forced President Barack Obama and Congress to create a 12-member committee of lawmakers tasked with reducing the imbalance over the next decade by $1.2 trillion. If the panel splits and cannot agree on a plan, severe across-the-board spending cuts would go into effect automatically.
The committee was a key part of a deal forged last week that allowed the government to boost its borrowing limit. But the deal fell short of the $4 trillion in cuts that Standard & Poor's said was needed to achieve a credible deficit plan. As a result, S&P downgraded the U.S. government's credit from AAA to AA+.
The deficits prompted a political backlash that allowed Republicans to take control of the House in last year's elections. While both parties say they are committed to reducing the deficits, Republicans are opposed to tax increases and Democrats are fighting to protect entitlement programs, such as Social Security and Medicare from big cuts.
Before 2009, the deficit had never come close to $1 trillion in a single year. The soaring deficits have reflected increased government spending in response to a deep recession plus a loss of tax revenues as millions of people lost their jobs.
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 George W. 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.