With three months still to go in the current budget year, the federal deficit has topped $1 trillion, but is lower than it was a year ago.
The Treasury Department said Tuesday that the amount of government red ink (totaling $1 trillion) shrank 7.6 percent from the $1.09 trillion deficit in June 2009.
The June 2010 deficit was the second-highest June deficit on record, at $68.4 billion, but was down from the all-time high of $94.3 billion in June 2009. That was when the government was spending heavily to stabilize the financial system and jump-start economic growth.
June is normally a surplus month, as the government collects tax payments from corporations and individuals who make quarterly payments. Only seven years in the past 56 have seen deficits in June.
Many private economists are forecasting that the deficit for the entire budget year, which ends on Sept. 30, will come in around $1.3 trillion. That would be the second highest deficit on record, but it would be down slightly from last year's all-time high ($1.4 trillion).
The Obama administration is forecasting that the deficit for the 2011 budget year, which begins Oct. 1, will remain above $1 trillion for a third straight year, projecting an imbalance of $1.27 trillion. And the administration predicts the imbalances over the next decade will total $8.5 trillion.
The deficits have been driven higher by the lingering effects of the worst recession since the 1930s. About one-third of the higher deficits in this period are a result of a drop in government tax revenues.
The other two-thirds of the deficit increases reflect higher government spending to stabilize the financial system with the $700 billion bailout program and the $787 billion stimulus program that Congress passed in February 2009. The increased spending also reflected added demands for such programs as unemployment benefits and food stamps.
Through the first nine months of the current budget year, government revenues have totaled $1.6 trillion, up 0.5 percent from the same period a year ago.
Government spending totals $2.6 trillion, down 2.8 percent from the same nine months a year ago. That decline primarily reflects lower spending on the financial bailout effort as banks are now repaying the billions of dollars they received to bolster their capital reserves at the peak of the financial crisis.
The tide of red ink has sparked a political backlash, with surveys showing rising unhappiness among voters with the ballooning deficits.
President Barack Obama has appointed a national debt commission to report after the November midterm elections on ways that the federal deficits can be brought under control.
The heads of the panel told the National Governors Association on Sunday that everything needs to be considered including curtailing popular tax breaks, such as the home mortgage deduction.
"The debt is like a cancer," Democrat Erskine Bowles told the governors. "It is going to destroy the country from within."