The government budget deficit in the U.S. for the year ended in September was the fourth-largest since World War II as lawmakers debate the impact of the looming spending cuts a month before the election.
The shortfall registered $1.09 trillion in fiscal 2012, down from $1.3 trillion in 2011, according to Treasury Department data issued Friday in Washington. It reached $1.42 trillion in 2009, the highest ever. In September, the U.S. registered a surplus of $75 billion compared with a shortfall of $62.7 billion in the same month last year.
The U.S. faces a so-called fiscal cliff of $1.2 trillion in mandated spending cuts, in addition to the expiration of George W. Bush-era tax reductions, if Congress can’t agree by Dec. 31 on ways to reduce the deficit. The world’s largest economy shows signs of improvement as unemployment last month dropped to the lowest level since January 2009.
“The Bush tax cuts are shaping up to be the main political battleground, and I would currently lean toward the idea that a deal will not get done until after the turn of the year,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, said before the report.
The September surplus matched the median forecast of economists surveyed by Bloomberg.
When lawmakers return to Washington in November for a post-election session, they will have only weeks to avert more than $500 billion in tax increases and $100 billion in automatic spending cuts set to take effect in January. A bipartisan group of eight U.S. senators is meeting this week to seek to identify broad areas of agreement on taxes and entitlement programs, without discussion of specific numbers or targets.
The White House budget office has said the budget cuts, known as sequestration and set to start in January, would undermine economic investment and cause “severe harm” to initiatives including food-safety inspections, air-traffic control and support for schools.
“The administration strongly believes that sequestration is bad policy, and that Congress can and should take action to avoid it by passing a comprehensive and balanced deficit reduction package,” the White House budget office report said.
Moody’s Investors Service said Sept. 11 that it may join Standard & Poor’s in downgrading the U.S.’s credit rating unless Congress next year reduces the percentage of debt-to-gross-domestic-product during budget negotiations.
Friday’s report showed revenue rose 8.9 percent in September from the same month a year earlier, to $262 billion. Spending dropped 38 percent to $187 billion from $303 billion.
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