US deficit climbs to $1.1 trillion
WASHINGTON - Nine months into the fiscal year, the federal deficit has topped $1 trillion for the first time.
The imbalance is intensifying fears about higher interest rates and inflation and already pressuring the value of the dollar. There’s also concern about trying to reverse the deficit - by reducing government spending or raising taxes - in the midst of a harsh recession.
The Treasury Department said yesterday that the deficit in June totaled $94.3 billion, pushing the total since the budget year started in October to nearly $1.1 trillion.
The deficit has been propelled by the huge sum the government has spent to combat the recession and financial crisis, combined with a sharp decline in tax revenues. Paying for wars in Iraq and Afghanistan also is a major factor.
The country’s soaring deficits are making Chinese and other foreign buyers of US debt nervous, which could make them reluctant lenders down the road. It could force the Treasury Department to pay higher interest rates to make US debt attractive longer-term.
“These are mind boggling numbers,’’ said Sung Won Sohn, an economist at the Smith School of Business at California State University. “Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run.’’
Government spending is on the rise to face the worst financial crisis since the Great Depression and an unemployment rate that has climbed to 9.5 percent.
Congress already approved a $700 billion financial bailout and a $787 billion economic stimulus package to jump-start a recovery, and there is talk among some Obama administration officials that a second round of stimulus may be necessary.