Federal budget deficit hits $904 billion in June

President Barack Obama is almost certain to face re-election having run trillion-dollar-plus deficits in each his first four years in office.

Obama and Republicans remain at odds over how to lower the deficit — disagreeing on how much to spend, where to cut and whether tax increases should be on the table. The gridlock has left a package of expiring tax cuts and scheduled spending increases in limbo, another threat to an already weak U.S. economy.

The Congressional Budget Office predicts the deficit for the full year, which ends on Sept. 30, will total $1.17 trillion. That would be a slight improvement from the $1.3 trillion deficit recorded in 2011, but still greater than any deficit before Obama took office.

One positive sign this year is the deficit is growing more slowly than last year.

In June it was 6.8% behind the pace for the same period in budget year 2011. And a key reason for that is that revenues are up 5.2% this year, while spending is down by 0.9%.

Financial Year

But the modest improvement has not cooled the budget debate in Washington.

Budget Deficit

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

A key part of his proposal is to allow tax cuts to expire for couples earning more than $250,000. He has called for extending similar cuts for people earning less than that.

Obama would also set a 30% tax rate on taxpayers making more than $1 million.

Republicans have rejected the tax increases. They want more 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 that would favor wealthy Americans.