WASHINGTON – The federal budget deficit reached $1.23 trillion in August. The third straight $1 trillion-plus deficit adds pressure on Congress and the White House to reach agreement on a long-term plan to trim government spending.
The Treasury Department said the deficit grew by $134.2 billion last month. At that rate, the nonpartisan Congressional Budget Office projects the deficit will total $1.28 trillion when the budget year ends in September. That would nearly match last year's $1.29 trillion imbalance and come in below the record $1.41 trillion hit in fiscal 2009.
A congressional panel is seeking agreement on $1.2 trillion in savings over the next decade. CBO Director Douglas Elmendorf warned the committee on Tuesday that spiraling interest payments could swamp the government's ability to pay for its operations and could spark a financial crisis if nothing is done.
President Barack Obama is expected to send the committee his recommendations to trim the deficit later this month. They will also include a series of tax hikes to pay for his $447 billion job-creation proposal.
On Monday, Obama asked Congress to limit itemized deductions for charitable contributions and other deductions taken by families making over $250,000 a year, close loopholes for oil and gas companies, change the tax treatment of corporate jets and require investment fund managers to pay higher taxes on certain income.
Republicans have rejected those ideas in the past.
Before 2009, the deficit had never come close to $1 trillion in a single year.
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.
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 widened after Obama and congressional Republicans agreed to extend Bush's tax cuts for two more years and include a one-year cut in the Social Security payroll tax in an effort to give the sluggish economy a boost.
Obama is seeking to extend the payroll tax cut for another year as part of his jobs initiative.