The US government ran a US$1.3 trillion deficit for the budget year that ended last month, the third straight year it has operated more than US$1 trillion in the red.
This year’s budget deficit was the second-highest on record. It is slightly ahead of the previous budget year’s US$1.29 trillion deficit, but below the US$1.41 trillion imbalance record in 2009.
A decade ago, the government was running surpluses and trillion-dollar deficits seemed unimaginable, but those deficits now loom over tense negotiations in Washington.
Lawmakers are under pressure to agree by the Thanksgiving holiday where they can cut US$1.2 trillion over the next decade. If they cannot, automatic cuts to Medicare, defense spending and other critical areas of the budget would go into effect in January 2013.
For this year, the government had to borrow US$0.36 of every dollar it spent. The string of massive debts has made interest on that debt the fastest growing budget category.
This year, net interest payments rose 15.7 percent to US$227 billion.
A slightly improved job market helped boost income tax revenue this year. From October last year through last month, the economy added 1.3 million net jobs. That compares with only 339,000 net job gains in the previous 12-month period.
Still, that has not been enough to bring the millions of Americans who lost jobs during the recession back into the work force.
The government also lost revenue because of the 2 percentage point cut in Social Security taxes, and also it had to pay for an extension of emergency unemployment benefits.
The US Congress approved both in December to boost the sluggish economy.
Total revenues increased 6.5 percent to US$2.3 trillion for the budget year that ended Sept. 30; spending rose 4.2 percent to US$3.6 trillion.
The nation’s debt is now US$14.8 trillion. The enormity of that figure has stoked intense partisan debate in Congress over spending and taxes. Polls show growing voter anger with the inability of both parties to reach solutions to the country’s budget problems.
Congress reached a last-minute deal in August to raise the government’s borrowing limit in stages., but as part of the deal, lawmakers tasked a 12-member deficit-cutting panel with finding at least US$1.2 trillion in savings over the next decade.
The committee, which is evenly split between Democrats and Republicans, has until Thanksgiving to come up with a plan. It would then go before the House and US Senate in December for up-or-down votes.
Administration officials said on Friday that Congress needs to reach an agreement through the supercommittee process, but also should approve US President Barack Obama’s US$447 billion jobs plan. However, the measure fell short of gaining the 60 votes required to be called up for debate in the Senate. All 46 Republicans in the chamber opposed the measure, which seeks to pay for the plan by boosting taxes on the wealthy and corporations.
The August budget deal is projected to trim future deficits by US$2.1 trillion. That includes the cuts made by the supercommittee and another US$900 billion in savings from caps on discretionary spending.
The cuts are expected to begin in the next budget year.
CBO estimates US$21 billion in cuts to this year’s deficit, which is estimated to be US$973 billion. The Obama administration is estimating that next year’s deficit will total US$956 billion.
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