Federal budget deficit on track to eclipse $1 trillion for third year

The federal government ran a $57.6 billion budget deficit in May down from a year earlier behind an increase in tax revenue and a lower cost estimate for the financial bailout, the Treasury Department reported Friday. 

Receipts totaled $175 billion in May, up 19 percent and nearly $30 billion higher than the same period last year while outlays were $233 billion, about $50 billion less than a year ago, according to the Treasury's monthly budget statement. 

The shortfall in May a year ago was $135.9 billion with most of the outlays improvement driven by a downward estimate in the cost of the Troubled Asset Relief Program (TARP) by about $45 billion.

Still, through eight months of the 2011 fiscal year the nation is facing its third straight $1 trillion-plus deficit -- totaling $927.4 billion so far compared with $935.6 billion during the same period in 2010, about $8 billion less, according to the report. 

Vice President Joseph Biden and congressional leaders will meet several times next week to discuss a way to tackle the burdensome debt and increase the $14.3 trillion debt limit before Aug. 2, when the Treasury says the U.S will default.

Total receipts for the fiscal year are $1.5 trillion, about 10 percent higher than last year, with outlays standing at $2.4 trillion, about 6 percent above last year's levels. 

So far this year, individual income tax payments were up 28 percent to $701.8 billion, while corporate tax receipts increased 5 percent.

Last month's deficit was close to the congressional estimate, with the Congressional Budget Office (CBO) on Tuesday projecting a $59 billion shortfall in May and a total federal budget deficit of $929 billion, $6 billion less than the deficit last year at this time.

Incoming revenue increased 19 percent, or $28 billion, compared to last May.

The nation started out 10 years ago, when President George W. Bush took office, with a surplus of $127 billion in 2001. Projections at the time showed the federal budget was expected to run $5.6 trillion in surpluses through the decade. 

Instead, the country began battling growing deficits, hitting a record $454.8 billion in 2008, following the approval of tax cuts, a new Medicare drug benefit program and funding for the ongoing wars in Iraq and Afghanistan. 

The Bush administration then passed the $700 billion TARP during a financial crisis in the fall of 2008 while the Obama administration tacked on a $787 billion economic stimulus package in February 2009 as a way to accelerate the nation's economic recovery. 

In December, Congress and the White House agreed to an $858 billion comprehensive package for a two-year extension of the 2001 and 2003 Bush-ear tax cuts for all income levels, as well as an extension of federal unemployment benefits through the end of 2011, which could push the fiscal 2011 budget deficit to $1.4 trillion, about the same as the record level in 2009, up from last year's $1.3 trillion. 

The deal, brokered by the White House and congressional Republicans, is projected to add $400 billion to the deficit this year.