U.S. budget deficit tops US$1 trillion

The fiscal year, the U.S. federal deficit has topped US$1 trillion for the first time.

By THE ASSOCIATED PRESS

WASHINGTON — The fiscal year, the U.S. federal deficit has topped US$1 trillion for the first time.

The imbalance is intensifying fears about higher interest rates and inflation, and already pressuring the value of the American 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 U.S. Treasury Department said Monday the deficit in June totalled $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 U.S. debt nervous, which could make them reluctant lenders down the road. It could force the Treasury Department to pay higher interest rates to make U.S. debt attractive longer-term.