US heading for trillion-dollar record deficit
The US is on track to post an all-time high annual shortfall of $1tn (€764bn) or more after it was revealed that the government ran a record budget deficit in November.
In just the first two months of the budget year that started on October 1, the deficit totalled $401.6bn billion dollars (€305bn), nearly matching the record gap of $455bn (€345bn) posted for all of last year, according to Treasury Department data.
If the deficit does top one trillion dollars for the current budget year, it also would be a post-Second World War high when measured as a percentage of the economy.
The increased red ink stems from both lower tax revenue and increased spending that is a result of the recessionary economy. The government is receiving less in business and personal income taxes while spending more on programmes such as unemployment insurance and welfare.
Elsewhere, emergency aid for the nation’s imperilled car industry was thrown into jeopardy last night as some Republicans revolted against a hard-fought deal between Democrats and the Bush White House to speed £9bn (€10.2bn) to the ailing manufacturers.
A congressional oversight panel yesterday questioned whether the treasury was following a clear strategy in its use of those funds. The panel, which includes academic and industrial representatives, also asked in a report whether the rescue effort had helped any homeowners avoid repossession.
The 37-page oversight report offers no specific conclusions, but the questions suggest sharp disagreements with treasury secretary Henry Paulson’s stewardship of the programme and echo some of the criticism raised in a Government Accountability Office audit last week.
Many Democrats in Congress have criticised the treasury for not using the funds to help home owners.
The department said yesterday that the gap between the government’s revenue collections and what it paid out last month totalled £109.5 billion, the largest deficit recorded for the month of November. The deficit was £65 billion in November 2007.
An annual deficit of a trillion dollars would equal 6.7% of the gross domestic product, the economy’s total output in a single year. That would surpass the previous post-war record in gross domestic product terms of 6% sent in 1983 when Ronald Reagan was president.
