WASHINGTON — The federal government is on track to record the second-highest deficit of all time with one month left in the budget year.
The deficit totaled $1.26 trillion through August, the Treasury Department said Monday. That puts it on pace to total $1.3 trillion when the budget year ends on September 30, slightly below last year’s record $1.4 trillion deficit.
Soaring deficits have become a major issue with voters heading into the midterm elections. Republicans say the deficits illustrate the growth of spending under Democrats and show their poor handling of the economy.
The Obama administration contends the record deficits were necessary to combat the most serious economic crisis since the Great Depression.
About one-third of the higher deficits 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 and boost the economy.
Deficits of $1 trillion in a single year had never happened until two years ago. The $1.4 trillion deficit in 2009 was more than three times the size of the previous record-holder, a $454.8 billion deficit recorded in 2008.
Last year’s deficit was equal to 9.9 percent of the total economy — the highest percentage in 65 years. The deficit equaled 21.5 percent of the economy in 1945, at the height of the U.S. involvement in World War II.
The 2010 deficit is expected to show only a slight improvement, dipping to 9.1 percent of the economy as measured by the gross domestic product. That would be the second-highest level in the past 65 years.
For August, the deficit totaled $90.5 billion. The government has run deficits in August every year over the past 57 years.
The Congressional Budget Office is forecasting that the deficit for this budget year will total $1.3 trillion, about $70 billion lower than last year. The CBO forecast is in line with expectations of many private economists although it is above the administration’s last official forecast, released in July. At that time, the administration projected this year’s deficit would total $1.47 billion, slightly higher than last year.
For 2011, the administration is forecasting a deficit of $1.42 trillion with the red ink totaling $8.5 trillion over the next decade. However, Obama has appointed a deficit commission to recommend ways to get the deficits under control. That panel will not release its recommendations until after November elections.
Through August, government revenues totaled $1.92 trillion, 1.6 percent higher than a year ago, reflecting small increases in government tax collections compared to 2009.
Spending has totaled $3.18 trillion, down 2.5 percent from the same period a year ago. That improvement reflected higher outlays for government programs such as defense, Social Security and Medicare, but lower government spending to stabilize the financial system.