The Treasury Department says it expects to borrow $392 billion in the current quarter to help finance the largest annual budget deficit in history.
The projection is $86 billion lower than an estimate the department issued in November, when it expected to borrow $478 billion. The improvement is largely due to higher-than-expected repayments of about $90 billion in bailout funds by large banks.
The department also says it borrowed $260 billion in last year's fourth quarter, below an earlier estimate of $276 billion. Treasury expects to borrow $268 billion in the second quarter of this year.
The projections come the same day that President Barack Obama proposed a $3.83 trillion budget that forecast a record $1.56 trillion deficit for this year, an increase from the $1.41 trillion deficit in the 2009 budget year.
Federal government borrowing has soared in the aftermath of the 2008 financial crisis and the steep recession that followed, as tax revenues from individuals and corporations have plummeted amid the weak economy. Spending has also jumped as a result of the Bush administration's $700 billion bank bailout program and the Obama administration's $787 billion stimulus package.
In an effort to address widespread joblessness, Obama's budget offers tax cuts for businesses, including a $5,000 tax credit for hiring new workers this year, help for the unemployed and $25 billion more for cash-strapped state governments. All the temporary measures would boost the deficit over the next two years by $245 billion.
The president's budget seeks to reduce the deficit, beginning with the 2011 budget year by placing a three-year freeze on some government programs, excluding defense, homeland security and large entitlement programs such as Social Security and Medicare.
The administration's 2011 budget also proposes a boost in taxes on the wealthiest Americans, families making more than $250,000 annually, by allowing the Bush tax cuts of 2001 and 2003 to expire.
The deficit in 2011 would drop to $1.27 trillion under the administration's plan, the third straight trillion-dollar-plus imbalance. The budget gap would fall to $828 billion in 2012 but would remain at levels surpassing any previous deficits through 2020.
The deficit for this year would be 10.6 percent of the total economy, a figure unmatched since the country was emerging from World War II. The administration does not trim the deficit below 3.6 percent of GDP for any year in the next decade, failing to meet its goal of lowering the deficit to 3 percent of GDP by 2015.
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