US deficit second largest in history

Washington, Oct 16 (DPA) The hole in the US government budget remained in the stratosphere for 2010, lending more ammunition to opposition Republicans less than three weeks before mid-term elections.

The shortfall totalled $1.294 trillion in the fiscal year ended Sep 30, second only to the $1.416-trillion deficit in 2009, the Treasury Department said Friday.

Lingering unemployment of 9.6 percent has constrained tax revenue streams. Then too, the US government has spent at least $1.5 trillion since the financial crisis of 2008 bailing out banks and two car companies and trying to stimulate the economy.

An equally devastating figure is projected for 2011.

‘We still have a long way to go to repair the damage to the economy and address the long-term deficits caused by the crisis,’ Treasury Secretary Timothy Geithner said in a statement.

Coming just before the Nov 2 vote for a new Congress, the dismal news will likely fuel Republican and Tea Party supporters in their intent to unseat US President Barack Obama’s Democratic Party from its congressional majority.

In a poll of the fringe conservative Tea Party movement that has energised Republican support, Bloomberg financial news service found that 85 percent of the supporters believe the economy will improve with Republicans in charge.

The Obama administration blames much of the deficit on his predecessor George W Bush’s administration, which took office in 2000 with a budget surplus and put through popular tax cuts. Obama argues that Bush’s war in Iraq, combined with Wall Street excesses that went uncontrolled under Bush, left the huge deficit for his administration to deal with.

Despite continuing high unemployment, Obama’s second year in office saw revenues increase slightly and expenditures decrease. But Obama’s push for health care reform has further provoked conservatives into action before the November 2 vote.

Republicans also want the tax cuts to be continued after they are set to expire, while insisting the deficit be reduced.

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