US deficit tops US$1 tril. for 3rd straight year

The Treasury Department said Wednesday that the deficit through July totals US$1.1 trillion. Three years ago, that would have been a record high for the full year.

This year's deficit is on pace to exceed last year's imbalance of US$1.29 trillion but fall short of the record US$1.41 trillion set in 2009.

For the first 10 months of the budget year, spending has risen 2.4 percent while revenue has climbed 8 percent. That's a sign that more people are working and paying taxes, although unemployment remains high at 9.1 percent.

Before 2009, the deficit had never come close to US$1 trillion in a single year. The soaring deficits have reflected increased government spending in response to a deep recession plus a loss of tax revenues as millions of people lost their jobs.

The government last recorded a budget surplus in 2001, when revenues were US$127 billion greater than spending. The surpluses were expected to total US$5.6 trillion over the next decade.

But the country was back in the red by 2002. The deficit grew after President George W. Bush won approval for broad tax cuts and launched the invasions of Iraq and Afghanistan.

In 2008, Bush's last full year in office, the deficit reached US$454.8 billion, a record at that time. And when the economy plunged into a deep recession, the yearly imbalance topped US$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 US$787 billion stimulus program to boost the economy.

The deficit also worsened after Obama and congressional Republicans agreed to extend Bush's tax cuts for two more years.

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