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WASHINGTON (AP) — The federal budget deficit is on pace to break
the $1 trillion mark for the third straight year, ratcheting up the
pressure on the White House and Congress to reach a deal to rein in
spending.
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The deficit totaled $971 billion for the first nine months of the
budget year, the Treasury Department said Wednesday. Three years
ago, that would have been a record high for the full
year.
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With three months to go, this year’s deficit will likely top last
year’s $1.29 trillion gap, according to the Congressional Budget
Office. But it is expected to come in below the record $1.41
trillion reached in the 2009 budget year. The budget year ends
Sept. 30.
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For June, the deficit was $43 billion, below the $68 billion
imbalance recorded in June 2010. Much of the improvement from last
year was due to a one-time drop in the estimated cost of education
loans.
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But the government is also receiving more tax revenue this year,
which reduces the deficit a bit. Revenue rose 9 percent, or $137
billion, through June, the Treasury’s report said.
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That’s partly because more Americans have jobs. The economy has
added 1 million jobs in the past nine months, though there are
still nearly 7 million fewer jobs than before the
recession.
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Government spending has also risen this year. Interest on the
national debt rose 9 percent to $386 billion in the first nine
months of this year, compared to the same period last year, one of
the largest increases in spending. Spending on Medicare, Medicaid
and Social Security benefits also increased.
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Soaring deficits have held up a vote to raise the nation’s $14.3
trillion borrowing limit. Republicans and President Barack Obama
are at odds over a long-term plan to trim federal spending.
Republicans have demanded steep spending cuts in return for voting
to raise the borrowing limit. Obama and Democrats in Congress want
tax increases to be part of the deal, which Republicans have
adamantly opposed.
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The government reached its borrowing limit in May. Treasury
Secretary Timothy Geithner has warned that if the limit is not
raised by Aug. 2, the country will default on its debt for the
first time ever.
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But negotiations between the White House and President Obama are at
a standstill as the two sides meet Wednesday for their fourth
negotiating session in as many days. Obama has said the daily
meetings will continue until a deal is reached.
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A two-hour session Tuesday produced no progress. That prompted the
top Republican in the Senate to propose giving Obama sweeping new
powers to increase the limit to avoid default.
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Minority Leader Mitch McConnell, R-Ky., offered a plan to allow the
president to demand up to $2.4 trillion in new borrowing authority
by the summer of next year in three separate submissions. Those
increases would automatically take effect unless both the
Republican-controlled House and the Democrat-controlled Senate
enacted legislation disapproving them.
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Obama would be able to veto such legislation, giving him power to
muscle through the debt increases.
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The GOP plan would require that Obama submit spending cuts along
with his borrowing requests. But unlike the increase in the
borrowing limit, they wouldn’t automatically take
effect.
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The government last recorded a budget surplus in 2001, when
revenues were $127 billion greater than spending. The surpluses
were expected to total $5.6 trillion over the next
decade.
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But the country was back in the red by 2002. The deficit grew after
President Bush won approval for broad tax cuts and launched the
invasions of Iraq and Afghanistan.
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In 2008, Bush’s last full year in office, the deficit reached
$454.8 billion, a record at that time. And when the economy plunged
into a deep recession, the yearly imbalance topped $1
trillion.
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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 $787 billion
stimulus program to boost the economy.
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The deficit also worsened after Obama and congressional Republicans
agreed to extend Bush’s tax cuts for two more years.
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