Deficit falls, but may still top $1 trillion

Associated Press / January 13, 2011

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WASHINGTON — The federal budget deficit narrowed slightly in December compared with a year ago, but the deficit for the entire fiscal year is still on pace to exceed $1 trillion.

The government ran a deficit of $80 billion last month, down 12.4 percent from the previous December, the Treasury Department said yesterday. Through the first three months of the current budget year, the deficit totals $370.8 billion, an improvement of 3.1 percent from the same period a year ago.

Private economists expect that the tax-cut package signed into law last month will lead to a much larger deficit while helping to boost economic growth.

The tax package provided a one-year reduction in Social Security taxes for individuals and accelerated tax breaks for businesses that invest in new equipment.

It also extended for two years George W. Bush-era tax cuts.

The estimated cost of the package is $858 billion, an amount that will be added to deficits over the next two budget years.

Economists at Goldman Sachs are forecasting that the deficit for the current 2011 budget year, which began Oct. 1, will total $1.3 trillion, giving the country a third consecutive year of $1 trillion-plus deficits.