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November 14, 2012

US Could Be on Path to Fifth Straight $1 Trillion Deficit

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US could be on path to fifth straight $1 trillion deficit after government runs $120 billion October deficit

Published November 14, 2012 | Associated Press

The federal government started the 2013 budget year with a $120 billion deficit, an indication that the nation is on a path to its fifth straight $1 trillion-plus deficit.

Another soaring deficit puts added pressure on President Barack Obama and Congress to seek a budget deal in the coming weeks.

The Treasury Department said Tuesday that the October deficit -- the gap between the government's tax revenue and its spending -- was 22 percent higher than the same month last year.

Tax revenue increased to $184.3 billion -- 13 percent greater than the same month last year. Still, spending also rose to $304.3 billion, a 16.4 percent jump. The budget year begins on Oct. 1. Officials said last year's figures were held down by a quirk in the calendar: the first day of October fell on a Saturday, which resulted in some benefits being paid in September 2011.

The deficit, in simplest terms, is the amount of money the government has to borrow when revenues fall short of expenses. The government ran a $1.1 trillion annual budget deficit in fiscal year that ended in September. That was lower than the previous year but still painfully high by historical standards.

Obama's presidency has coincided with four straight $1 trillion-plus deficits -- the first in history and record he had to vigorously defend during his successful re-election campaign.

The size and scope of this year's deficit will largely depend on what happens with the so-called fiscal cliff -- a package of tax increases and spending cuts set to take effect in January unless the White House and Congress reach a budget deal by then.

If the economy goes over the fiscal cliff, this year's deficit would shrink to $641 billion, according to the Congressional Budget Office. But the CBO also warns that the economy would sink into recession in the first half of 2013.

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