$1 trillion isn't that far away

Published: Wednesday, January 14, 2009 at 6:01 a.m.
Last Modified: Tuesday, January 13, 2009 at 11:04 p.m.

WASHINGTON - The federal government already has run up a record deficit of $485.2 billion in just the first three months of the current budget year, the Treasury Department said Tuesday.

The deficit is on track to surpass $1 trillion for all of fiscal 2009 and some economists believe it could go much higher.

The deficit for December totaled $83.6 billion, a sharp deterioration from a year ago when the government managed a surplus of $48.3 billion. Wall Street economists surveyed by Thomson Reuters expected a slightly lower deficit of $83 billion.

All the red ink is occurring because of the massive spending on the $700 billion financial rescue program and a prolonged recession which has depressed tax revenues.

The imbalance from October through December is the highest on record for a first quarter and surpasses the mark for a full budget year of $454.8 billion set last year.

The Congressional Budget Office last week projected that the deficit for this fiscal year will hit $1.2 trillion. But that projection does not include any of the costs from the economic stimulus program that President-elect Barack Obama is hoping Congress will pass in the next few weeks in an effort to keep the current recession from deepening.

The cost of Obama's two-year program is expected to be around $800 billion.

The red ink through December includes $247 billion that has been spent on the $700 billion financial rescue program that Congress passed on Oct. 3 to deal with the most serious financial crisis to hit the country since the 1930s.

Much of that money has been spent injecting fresh capital into banks in an effort to repair their balance sheets and encourage them to resume more normal lending. Part of the bailout funds also went to shore up insurance giant American International Group Inc. and the auto industry.

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