WASHINGTON (AP) — The $38 billion in spending cuts agreed to last week won't prevent this year's budget deficit from setting another record high, estimated at $1.5 trillion.
Most of the agreed-to spending cuts either affect future budgets or amount to accounting gimmicks that won't reduce actual spending.
The Treasury Department reported Tuesday that the deficit already totals $829.4 billion through the first six months of the budget year — a figure that until 2009 would have been the biggest ever for an entire year. For March alone, the government ran a deficit of $188 billion.
President Barack Obama and congressional Republicans averted a government shutdown last week by agreeing to the largest-ever spending cuts for a single year. But David Wyss, chief economist at Standard & Poor's in New York, said those cuts amount to a "rounding error" in this year's deficit.
The cuts include unspent money from the 2010 census, which is completed, and $2.5 billion from the most recent repeal of highway programs that can't be spent because of restrictions set by other legislation. They also include $3.5 billion in unused bonuses for states that enroll more children in a health care program for lower-income families.
Wyss expects the deficit will surpass the record of $1.41 trillion hit in 2009. The nonpartisan Congressional Budget Office raised its estimate earlier this year from $1.1 trillion to $1.5 trillion. A tax-cut package negotiated in December by Obama and Republicans, which includes a one-year reduction in the Social Security payroll tax, prompted the CBO to raise its estimate.
The ballooning deficit is certain to give Republicans leverage in future spending debates, starting with the upcoming vote to raise the government's borrowing authority above $14.3 trillion.
The Treasury has told Congress that it must vote to raise the debt limit by summer. Without an increase, the government would not be able to meet its current debt payments, resulting in an unprecedented default on its debt.