U.S. Budget Deficit On Pace To Reach Record $1.5 Trillion

With spending continuing to grow at a faster rate than tax payments, the federal budget deficit is on pace to reach a record $1.5 trillion by September, the Wall Street Journal reported.

According to a report by the Congressional Budget Office, the budget deficit recorded in January was at $53 billlion and in the first four months of fiscal year 2011, the deficit reached $424 billion.

The CBO said the deficit for the first four months is slightly lesser than that recorded in the same period in 2010.

Still, the CBO projects the deficit to reach a record number when the fiscal year ends in September. One of the reasons for the increase is the tax-extension agreement that President Barack Obama entered into with Republicans in Congress last year. That deal will add over $800 billion to federal budget deficits over the next ten years, the Journal said.

The CBO report also mentioned several noteworthy trends:

• The fastest growing chunk of the budget is interest payment on the national debt – recorded at $80 billion during the first four months of the year.
• Unemployment benefits went down by 18 percent to $45 billion.
• Payroll taxes went up by $45 billion – indicating that wages are on the rise.

The report said all these trends are likely to continue.

The CBO also reported that “Outlays for the Troubled Asset Relief Program, Social Security… also increased.” Medicaid expenditures also grew by $7 billion.  These increases were offset partially by several large reductions to include a $2.4 billion decrease in outlays for international security assistance.

On Monday, the President is scheduled to present his proposed 2012 budget to Congress.

In his State of the Union address, President Obama hinted on several items that will be slashed. Jacob Lew, White House budget director, named several items that were target for budget cuts.

One item is the government’s funding for the Great Lakes Restoration Initiative – a savings expected to amount to $125 million. Another is a community development program that funds housing, streets and economic development projects as well as a community service grant program. Cuts in both projects are expected to generate $650 million in savings.

Lew said, “To achieve the deeper cuts needed to support this spending freeze, we have had to look beyond the obvious and cut spending for purposes we support.”

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