Tuesday, 12 Jun 2012 05:19 PM

By Newsmax Wires

The U.S. government budget deficit dramatically widened in May, as spending jumped 31.3 percent from the same month a year ago.

The deficit expanded to $124.6 billion from a $57.6 billion shortfall in May 2011, according to Treasury Department data released today in Washington.

Overall, the federal budget deficit is approaching $1 trillion for a fourth straight year even though the government is collecting more tax revenue than last year.

The Treasury Department said Tuesday that the deficit grew by $124.6 billion in May. That put the deficit through the first eight months of the budget year at $844.5 billion/

The Congressional Budget Office forecasts that the deficit for the entire 2012 budget year, which ends Sept. 30, will total $1.17 trillion. That’s only a slight improvement from the $1.3 trillion deficit recorded in fiscal 2011. And it is certain to keep the federal budget near the center of the presidential campaign.

So far this year, government receipts are running 5.3 percent higher than a year ago. A better job market and modest economic growth have led to higher tax revenue.

Receipts in May totaled $180.7 billion, the second-largest tax take for the month of May, The Associated Press reported.

Rising tax collections have also helped state governments. U.S. states expect to collect higher tax revenue in the coming budget year that combined will top the collections being received before the recession, according to the findings of a survey released Tuesday by the National Governors Association and the National Association of State Budget Officers.

The extra tax revenue hasn’t cooled the budget debate in Washington.

President Barack Obama and Republicans remain at odds over how much to spend, where to cut, and whether they tax increases should be on the table.

Obama submitted a budget to Congress in February that calls for $4 trillion in deficit reduction over the next decade through a combination of spending cuts and tax hikes on the wealthy.

Republicans have rejected the tax increases and want deeper cuts in government programs. The GOP-controlled House has approved a budget that calls for deep cuts in Medicare and other programs and a new round of tax cuts.

The House-approved spending plan has no chance of winning approval in the Senate, where Democrats hold a slim majority. That sets the stage for gridlock until after the November elections when lawmakers will be faced with a number of end-of-the-year deadlines.

Mitt Romney, the Republican presidential nominee, has proposed broad but largely unspecified spending cuts. Romney also wants to cut taxes further.

Tax cuts approved during President George W. Bush’s administration are scheduled to expire at the end of December. In addition, a set of automatic spending cuts totaling about $1.2 trillion over 10 years are scheduled to kick in. Both parties oppose the automatic spending reductions because they include deep cuts in defense.

However, they have been unable to reach an agreement so far on alternate spending cuts or tax increases that would prevent the automatic cuts from taking effect.

The government last recorded an annual budget surplus in 2001. Deficits returned after Bush won approval for the broad tax cuts, pushed a major drug benefit program for seniors and helped with the launch of wars in Afghanistan and Iraq.

The deficit grew further under Obama. The Great Recession shrank tax revenue as unemployment rose and income fell. The deficits have topped $1 trillion in each of Obama’s first three years in office.

The U.S. government risks a fiscal crisis unless it makes significant changes in tax and spending policies, the CBO said on June 5. The non-partisan agency said that without policy changes, the national debt within 15 years will top the historical peak set after World War II. In 1946, government debt amounted to 109 percent of the economy.

“I am sure there will be brinksmanship and possibly even some investor panic, but in the end, everything will work out,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Conn. “Having said that, Washington had better get it right in 2013, as next year may well be the last chance to get our fiscal house in order on our own terms.”

“If politicians fail again next year to get their hands around the problem, markets are likely to begin losing patience, as has been the case in Europe,” Stanley said by email before today’s report.

Estimates of the May budget gap ranged from $30 billion to $130 billion in the Bloomberg survey of 25 economists.

The CBO estimated last week the May deficit would be $125 billion. The CBO said in a report dated June 7 that the results were influenced by the shift of certain payments from May to April.

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