Washington: The US federal government’s deficit rose sharply in October, casting a cloud over the start of the fiscal as President Barack Obama and Congress tackle the coming “fiscal cliff” and ballooning debt.
The treasury department reported the US budget deficit rose 22% in October from a year ago, to $120 billion, as spending far outpaced revenues.
October, the first month of the federal government’s fiscal, typically runs a deficit. But the budget gap reported on Tuesday was much wider than the consensus analyst estimate of $113 billion.
Spending jumped 16% to $304.3 billion and revenue rose 13% to $184.3 billion last month, the treasury said.
In fiscal 2012 that ended on 30 September, the Obama administration trimmed the budget deficit by some $200 billion to $1.1 trillion, or 7.0% of gross domestic product (GDP).
For the current fiscal, it aims to reduce the deficit to below $1 trillion for the first time in five years, following massive government outlays aimed at pulling the economy out of a severe 2008-2009 recession.
The White House’s target is a $991 billion deficit, or 6.1% of GDP.
But the sustained deficit continues to push the country’s debt load higher.
The US debt currently stands at about $16.2 trillion, and continued borrowing needs to finance the budget shortfall will send the government past the fixed $16.39 trillion sometime in the final days of the year.
The treasury can manage at that level without increasing the ceiling into March by using accounting manoeuvres, according to government officials.
But at the same time politicians are battling over the so-called fiscal cliff package of extreme spending cuts and tax increases due 1 January unless politicians can reach a compromise to avoid them.
While the measures would slash the deficit by $500 billion, economists warn they could tip the fragile economy back into recession.