WASHINGTON — The federal budget deficit soared to a record for May of $189.7 billion, pushing the tide of red ink close to $1 trillion with four months left in the budget year.
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The rising deficit reflects increased government spending due to the recession, and billions of dollars spent on bailouts for banks and other troubled companies.
The Treasury Department reported Wednesday that the red ink so far this year totals $991.9 billion. The administration is projecting the deficit for the budget year that began Oct. 1, will total an all-time record of $1.84 trillion. That would be more than four times the amount of last year's record deficit.
Benefit program spending
Because of the recession, spending has increased for benefit programs such as unemployment compensation and food stamps. Outlays also have risen because of the $787 billion economic stimulus package that President Barack Obama pushed through Congress earlier this year.
The new Treasury report showed government spending totals a record $2.37 trillion through the first eight months of the budget year, 18 percent more than the year-ago period.
At the same time, the economic downturn has cut into tax revenues. The report showed that government receipts total $1.67 trillion through the May, down 18 percent from last year. Rising unemployment and struggling businesses have meant a drop in both income and corporate taxes.
Last month's imbalance compared with a $20.9 billion deficit in April, the first time that happened in 26 years. April is a month when the government normally runs surpluses reflecting tax payments.
Triple the red ink
The $991.9 billion deficit so far this budget year is more than triple the amount of red ink incurred during the year-ago period.
Under the administration's budget estimates, the $1.84 trillion deficit for this year will be followed by a $1.26 trillion deficit in 2010, and will never dip below $500 billion over the next decade. The administration estimates the deficits will total $7.1 trillion from 2010 to 2019.
Economists are worried that such large borrowing needs could trigger steep increases in interest rates if domestic and foreign investors start demanding a higher return for holding Treasury debt.
Treasury Secretary Timothy Geithner traveled to Beijing last week to reassure officials in China, the single-largest holder of U.S. Treasury debt, that the administration is serious about getting control of the deficits once the current downturn and financial crisis have passed.
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