First Quarter of 2002 Budget in the Red

A political dispute over who is to blame is sure to follow Tuesday's announcement that the government posted a deficit during the first three months of fiscal 2002, which began Oct. 1, 2001.

The government posted a surplus of $26.6 billion in December but it wasn't enough to keep the quarter out of the red, the Treasury Department reported Tuesday.

For the first three months of fiscal 2002, the government ran a deficit of $37.1 billion, considerably larger than the $2.3 billion shortfall recorded for the same period a year ago.

The $37.1 billion was in line with the $40 billion shortfall projected by the Congressional Budget Office.

Many analysts believe rising spending for the war on terror and the sour economy, which fell into recession in March, will probably force the government to register a deficit for the current budget year, something that hasn't occurred since 1997.

Despite the war's toll, the biggest spending categories in December were: interest on the public debt — $80.1 billion — reflecting in part semiannual interest payments to Social Security and other trust funds investing in government securities; Social Security, $39.8 billion; Health and Human Services Department programs, including Medicare and Medicaid, $37.2 billion; and military, $25.8 billion.

December's revenues totaled $187.9 billion while spending came to $161.3 billion.

Late last year, White House budget chief Mitchell Daniels acknowledged that annual budget deficits are likely for the next two to four years. Daniels blamed the return of deficits on the recession and the costs of waging war in Afghanistan and battling terrorism at home.

Democrats, however, blame the 10-year, $1.35 trillion tax cut that President Bush pushed through Congress last spring for the budget's likely return to red ink. It promises to be a major campaign issue for the Democrats, who are seeking to maintain control of the Senate and possibly take over the House in November.

For the three months of the current budget year, spending totaled $503.4 million, an 8.4 percent hike from the same period a year ago. Revenues for the first quarter of the 2002 budget year came to $466.3 million, a 0.9 percent rise from the same period last year.

For all of fiscal 2001, which ended Sept. 30, the government posted a budget surplus of $127 billion, about half the previous year's record total of $237 billion. It was the first time since 1992 that the government's balance sheet didn't show an improvement.

The Associated Press contributed to this report.