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U.S. government on pace for smaller deficit in 2012

Federal Reserve Building, Washington D.C. Credit: Flickr / Ken Mayer

WASHINGTON -- The Treasury Department said on Thursday that through the first three months of the current budget year the federal deficit was $322 billion, $47 billion less than the same quarter of the 2011 budget year.

Part of the reason for the lower deficit is an accounting quirk that shifted some early payments to the final week of the previous year's budget. The imbalance remains high by historical standards, which should keep lawmakers debating tax increases and spending cuts through Election Day.

The Congressional Budget Office estimates the government will run a $973 billion deficit for the entire 2012 budget year, which began on Oct. 1. While lower than last year's $1.3 trillion imbalance, it would be higher than any previous deficit before fiscal year 2009.

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The government ran an all-time record deficit of $1.41 trillion in fiscal 2009, and a $1.29 trillion imbalance in 2010.

After factoring in the impact of the accounting shift, government spending totaled $892 billion through the first three months of this budget year. That's roughly the same as the first three months of last year. Net interest payments on the government debt continue to be one of the fastest rising categories of government spending.

Government revenues were also up. They totaled $555 billion through the first quarter, up more than 4 percent from the same period last year. Increases in individual and corporate income tax receipts helped boost revenue, a sign the economy has strengthened from the previous year.

Even with the gains, the nation's public debt is more than $15 trillion and rising. Polls show growing voter anger with the inability of both parties to reach solutions to the country's budget problems.

On Thursday, President Barack Obama asked Congress to raise the borrowing limit even further. The $1.2 trillion increase was part of a deal last summer to lift the government's borrowing limit in stages.

As part of that deal, lawmakers tasked a 12-member deficit-cutting panel with finding at least $1.2 trillion in savings over the next decade. But the committee failed to meet a November deadline to reach agreement on the cuts. So, under the agreement, automatic cuts of that amount will begin on Jan. 1, 2013.

This year's deficit may also rise because Congress extended a Social Security tax cut and emergency unemployment benefits through February. And they are likely to vote next month to extend them through the end of the year.

The two programs are estimated to cost around $200 billion and could push the deficit back above $1 billion if they aren't offset.

The CBO is expected to release new budget projections for the next decade later this month.