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US government runs $120 billion October deficit

Associated Press Modified: November 13, 2012 at 3:30 pm •  Published: November 13, 2012
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If the White House and Congress can reach a budget deal that extends the tax cuts and avoids the spending cuts, the deficit will end up roughly $1 trillion for the budget year, the CBO says.

Many private economists predict lawmakers will agree to a deal that extends most of the tax cuts and spending provisions. As a result, the deficit for this year will come in close to $1 trillion.

The government has run annual deficits for more than a decade and hit a record $1.41 trillion in 2009, Obama's first year in office. That was largely because of the worst recession since the Great Depression. Tax revenue plummeted during the downturn, while the government spent more on stimulus programs.

President George W. Bush also ran annual deficits through most of his two terms in office after he won approval for broad tax cuts and launched wars in Afghanistan and Iraq.

The last time the government ran an annual surplus was in 2001.

One of the biggest challenges for the federal budget is the aging of the baby boom generation. That is raising government spending on Social Security and on Medicare and Medicaid. At the same time, the fragile economy, along with tax cuts, has reduced government revenue.

Over the past three years, revenue has fallen below 16 percent of the total economy as measured by the gross domestic product. Spending has exceeded 22 percent of GDP. The government has been forced to borrow to make up the gap, which has pushed the federal debt to $16.2 trillion.

The government is expected to hit its borrowing limit of $16.39 trillion by the end of December, unless Congress votes to raise it again.