* September deficit widens less than expected
* Political battle over budget still raging
* Debt panel has tall task before looming deadline
By Pedro Nicolaci da Costa
WASHINGTON, Oct 14 The U.S. budget gap widened
slightly in fiscal 2011, staying above $1 trillion for a third
straight year and providing fodder for a political battle over
taxes and spending ahead of next year's presidential election.
The Treasury Department report on Friday comes just over
two months after an epic showdown over the nation's debt
ceiling that pushed the United States close to a debt default
and led to a downgrade of America's prized AAA credit rating.
The shortfall in September, the final month of the fiscal
year, widened to $64.57 billion compared to the same month a
year earlier, although it came in at a few billion dollars less
than economists had projected. The annual deficit was $1.299
trillion, up from 1.294 trillion in fiscal 2010.
The U.S. economy, the world's largest, has escaped the
painful sovereign debt crisis the euro zone is now suffering,
although the deterioration in its fiscal stance has roiled
Many experts argue anemic U.S. growth and a dire job market
call for near-term fiscal stimulus or, at the very least,
restraint in implementing spending cuts.
President Barack Obama has proposed a $447 billion plan to
create jobs, but it was rejected by the Senate this week and
now lawmakers are trying to pick up the pieces.
Republicans in Congress have been pushing hard for deep
spending cuts to address the budget gap.
While the budget deficit widened in dollar terms in the
latest fiscal year, it narrowed to 8.7 percent of U.S. gross
domestic product from 9 percent in fiscal 2010. Economists say
the GDP gauge is a more meaningful metric than the size of the
budget shortfall measured in dollars.
U.S. GDP expanded under 1 percent in the first half of the
year while unemployment has remained stuck above 9 percent for
several months, raising fears of a new recession. Such concerns
recently prompted Ben Bernanke, Chairman of the Federal
Reserve, to warn lawmkers during testimony earlier this month
that sharp reductions in government spending at a time of
fragile recovery could be dangerous.
"(A) factor likely to weigh on the U.S. recovery is the
increasing drag being exerted by the government sector,"
Bernanke told the Joint Economic Committee of Congress.
Even as he called for steps to bring the long-term deficit
under control, the Fed chief urged legislators to "avoid fiscal
actions that could impede the ongoing economic recovery."
After the debt ceiling fiasco in August, Congress created a
special deficit panel charged with reaching a deal to cut $1.2
trillion over the next decade by Nov. 23. If they fail,
automatic budget cuts will be triggered starting in 2013 that
would cut funding to selected agencies and programs across the
board and hit defense spending hard.