Federal deficit running slightly below last year's record with 2 months left in budget year

With two months to go in the budget year, the federal deficit is running slightly below the all-time record set a year ago.

The Treasury Department said Wednesday that the deficit for July totaled $165 billion, pushing the imbalance for the year ended Sept. 30 to $1.17 trillion. That is down 7.7 percent from the same time last year, reflecting lower spending on emergency programs to combat the recession and stabilize the financial system.

The Obama administration continues to predict that this year's deficit will surpass 2009's record imbalance of $1.42 trillion. In a new forecast released in late July, the administration projected that the deficit will climb to $1.47 trillion in 2010 and fall only slightly to $911 billion in 2012.

Many private forecasters, though, believe the deficit for this year will come in lower at around $1.3 trillion. Still, deficits in the $1 trillion range far exceed what the country has experienced in the past and have set off alarm bells among voters.

The Obama administration contends that the government had no choice but to run huge deficits over the past two years in an effort to deal with the most serious economic crisis since the Great Depression of the 1930s. But Republicans say that the billions spent on economic stimulus and stabilize the banking system have had little impact on getting the unemployment rate down. They hope to make the huge deficits an issue in the upcoming election.

President Barack Obama has appointed a deficit commission which is scheduled to report in December, after the November congressional elections, with recommendations on how the huge deficits can be brought under control in coming years.

Republican opposition has forced the administration to scale back its efforts to pass new jobs programs. The House came back into session Tuesday to pass an emergency $26 billion jobs bill that Democrats contend will save 300,000 teachers, police and other government employees from election-year layoffs. Obama quickly signed the measure into law.

However, to keep from boosting the deficits, the administration agreed to pay for much of this jobs program by closing a tax loophole used by multinational corporations and by reducing food stamp benefits for the poor.

The cost of this program was significantly reduced from earlier stimulus bills and from what Democrats had first hoped to achieve. It was expected that the measure would be the last major stimulus program to win congressional approval before the November elections.

The $165 billion deficit in July was the fourth-highest monthly deficit on record but lower than the all-time monthly record of $180.7 billion in deficit spending which occurred in July 2009.

Through the first 10 months of this budget year, government revenues total $1.75 trillion, 0.7 percent above last year, reflecting a slight rebound in tax revenues from 2009 when individual and corporate taxes plunged during the steep recession.

Government spending totaled $2.92 trillion through July, down 2.8 percent year-over-year, with much of the change reflecting smaller outlays for the government's controversial $700 billion bank bailout program.

That left a deficit through July of $1.17 trillion, down from an imbalance of $1.27 trillion for the same period in 2009.