MercoPress. South Atlantic News Agency

No end on sight to US budget deficit: one trillion USD in fiscal 2010

The once all mighty US dollar rapidly eroding

United States registered its largest December budget deficit on record as higher unemployment reduced revenue and the government spent money to help the economy recover.

The excess of spending over revenue rose to 91.9 billion USD last month, compared with a deficit of 51.8 billion USD in December 2008, the Treasury Department announced Wednesday in Washington in its monthly budget statement. The US has posted a record 15 straight monthly deficits.

The figures highlight the challenges facing the Obama administration as it searches for ways to keep the deficit from ballooning further, while at the same time trying to preserve the recovery and help spur job growth. The government’s 787 billion USD economic rescue plan contributed to the record 1.4 trillion USD deficit in fiscal year 2009 that ended in September.

The deficit will probably exceed one trillion USD for the second consecutive fiscal year, according to estimates by White House and congressional budget officials. The US economy lost 7.2 million jobs since the recession started two years ago and the unemployment rate was 10% in December, close to a 26-year high.

To help reduce the deficit and recoup losses from the Troubled Asset Relief Program, President Barack Obama plans to raise as much as 120 billion through a fee on financial institutions, an administration official said earlier this week.

The White House hasn’t settled on the final structure of the fee and how to target the big banks that have returned to profitability, said the official, who requested anonymity.

Government spending in December increased 7.3% from the same time a year earlier to 310.8 billion USD, the largest December figure on record. Revenue and other income dropped 7.9% to 218.9 billion USD, according to the Treasury’s budget data. Revenue, on a year-over-year basis, has declined a record 20 consecutive months, according to the Treasury.

Spending for the 2010 fiscal year that started in October totalled 876.2 billion, a decrease of 0.4% from the previous year. Revenue dropped 11% from 2009.

Spending by the Social Security Administration rose to 218.1 billion from 169.9 billion for the fiscal year to date; spending by the Department of Health and Human Services, which administers the Medicare and Medicaid health programs, rose to 208.5 billion from 184.8 billion, spending by the Defence Department rose to 176.4 billion from 172.2 billion, and spending on the financial-rescue plan TARP fell to 6.2 billion from 91.2 billion.

Mounting monthly deficits keep pushing the US government up against its debt limit. President Obama signed legislation increasing the US debt limit by 290 billion in December to 12.39 trillion USD, enough to tide the government over for about two months. The measure was the fourth debt-limit increase in 18 months.

Since taking office a year ago, the Obama administration has announced plans to spend trillions of dollars to rebuild an economy battered by the longest contraction since the Great Depression and prop up an ailing banking system.

The cost of fighting wars in Iraq and Afghanistan pushed the budget into the red during the presidency of George W. Bush. The budget went from a surplus of 127.3 billion in the fiscal year ending Sept. 30, 2001, at the start of the Bush administration, to a 454.8 billion deficit in the fiscal ending Sept. 30, 2008, according government statistics.