Ahead of the Bell: US budget deficit
WASHINGTON (AP) — The end of the 2012 federal budget year is expected to produce the fourth straight annual deficit above $1 trillion.
The Congressional Budget Office has estimated that the deficit totaled $1.1 trillion for the 12 months that ended Sept. 30. The Treasury Department is scheduled to release the figure at 2 p.m. EDT Friday.
The deficit will have topped $1 trillion in each of President Barack Obama's four years in office — an issue that's sparked sharp debate in the presidential campaign. Obama's Republican challenger, Mitt Romney, contends that Obama failed to achieve a pledge to halve the deficit he inherited by the end of his first term.
When Obama took office in January 2009, the CBO forecast that the deficit for that year would total $1.2 trillion. It ended up at a record $1.41 trillion.
The increase was due, in part, to higher government spending to fight the worst recession since the Great Depression. Tax cuts enacted under President George W. Bush and wars in Iraq and Afghanistan contributed to the deficits.
The budget gaps in 2010 and 2011 were slightly lower than the 2009 deficit as a gradually strengthening economy generated more tax revenue. But the deficits still exceeded $1 trillion.
Obama is campaigning for a second term with a pledge to cut deficits by $4 trillion over the next decade. He says he would do so by ending the Bush-era income tax cuts for higher-income Americans and by restraining the growth of spending.
Romney has said he would cut spending growth to help narrow the budget gap. He would cap spending growth at 20 percent of the economy by 2016. Spending growth in 2012 has accounted for about 23 percent.
The government borrowed about 31 cents of every dollar it spent in 2012. The string of $1 trillion-plus deficits has driven the national debt above $16 trillion. The magnitude of that figure has intensified debate in Congress over spending and taxes but little movement toward compromise.
Many fear that the budget deadlock will send the economy over a "fiscal cliff" next year, when tax increases and deep spending cuts will take effect unless a budget deal is reached.
Obama wants to eliminate the income tax cuts for families that make more than $250,000. Republicans in Congress and Romney have resisted. They argue that with the economy still weak, the government should not be raising anyone's taxes.
Congress may address the budget crisis during a lame-duck session of Congress after the November elections.