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Budget deficit on track to top $1 trillion

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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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