Federal Deficit Tops $1 Trillion
For the first time in history the federal deficit has topped $1 trillion dollars, according to Treasury Department statistics released on Monday.
The Department reported that the U.S. federal government spent 94.3 billion dollars more than it made in June, pushing the red ink to nearly 1.1 trillion dollars, with three months left in the current fiscal year.
By comparison, in June 2008, the U.S. government ran a surplus of 33.55 billion dollars.
The record-breaking deficit is intensifying fears about higher interest rates and inflation, and already pressuring the value of the dollar. There’s also concern about trying to reverse the deficit — by reducing government spending or raising taxes — in the midst of the worst financial crisis since the Great Depression.
The Obama administration is forecasting that the budget deficit would rise to an all-time high of 1.84 trillion dollars in the current fiscal year, about four times the record set last year.
The country’s soaring deficits are making Chinese and other foreign buyers of U.S. debt nervous, which could make them reluctant lenders down the road. It could force the Treasury Department to pay higher interest rates to make U.S. debt attractive longer-term.
“These are mind boggling numbers,” said Sung Won Sohn, an economist at the Smith School of Business at California State University. “Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run.”
President Barack Obama and other administration officials, including Treasury Secretary Timothy Geithner, have said the U.S. is committed to bringing down the deficits once the country has emerged from the current recession and financial crisis.
In the meanwhile, talk continues of more government spending, including a second stimulus and massive healthcare reform.
