WASHINGTON (AP) — A government report released on Friday predicts that the federal budget hit a near-record $1.3 trillion in the just-completed fiscal year.
The figure matches last year’s deficit tally but shows slight improvement over a record set two years ago.
The Congressional Budget Office analysis is in line with previous estimates but offers yet another reminder of the government’s precarious fiscal position — just as a congressional supercommittee is working to produce at least $1.2 trillion in deficit savings over the coming decade.
The 2009 record deficit of $1.4 trillion was registered as the country struggled through a recession and was in the midst of the Wall St. bailout. Continuing weakness in the economy has kept tax revenues low. The revenue picture did improve in 2011 as individual income tax receipts rose 22 percent to $1.1 trillion, CBO estimated.
The economy is being weighed down by higher oil prices, an economic slowdown in Europe, and continuing weakness in the housing sector. As a result, corporate income tax receipts dropped by 6 percent.
Interest payments on the $14.9 trillion national debt spiked by 17 percent, to $266 billion, despite historically low rates. But the cost of unemployment benefits dropped by 24 percent as fewer claims were filed. Lower war costs limited the increase in military spending to just over 1 percent, CBO said.
Most economists believe the most important measure of the deficit is to compare it against the size of the economy. The 2011 deficit equaled 8.6 percent of gross domestic product, a slight drop from the 8.9 percent of GDP registered last year. It’ll take major changes to the way the government does business — some combination of new revenues and major spending cuts — to get the deficit down to about 3 percent of GDP, the level that many analysts say is sustainable.
The supercommittee is supposed to come up with at least $1.2 trillion over 10 years but economists and budget experts say it’ll take a far larger deficit-cutting effort to ease the dangers that future deficits pose to the economy.
The Treasury Department will issue the government’s official deficit tally later this month, but it’s unlikely to differ much from the CBO tally.