The U.S. government racked up a smaller deficit in the opening month of fiscal 2012 than it did in October a year earlier, the Treasury Department said on Thursday.

The monthly shortfall between spending and income was $98.47 billion in October this year, down from $140.43 billion in October 2010, partly because some regular benefit payments were made early this year.

The government's accounting year runs through September 30, so October was the first month of fiscal 2012.

Since October 1 fell on a Saturday, Treasury accelerated $31 billion of benefit payments into September, which had the effect of reducing October outlays and the monthly deficit.

Still, even when those benefit payments are added to October's figures, the deficit for the month came in about $11 billion lower this year than in October 2010.

The government posted deficits topping $1 trillion a year for three straight years through fiscal 2011 but the Congressional Budget Office is predicting the red-ink total could fall to $973 billion for the current fiscal year.

With analysts regularly identifying persistent lofty deficits as a key threat to U.S. long-term prosperity, a panel of Republicans and Democrats is trying to craft a deficit reduction deal before a November 23 deadline.

So far, it is unclear whether lawmakers can overcome their own differences about taxes and spending and deliver a set of proposals that could put the country on a sounder course.

Republicans say any tax increases would further slow an anemic recovery while Democrats say if spending programs for poor and middle-income Americans are cut, then rich Americans should pay higher taxes to share the burden.

During October, total government outlays declined to $261.54 billion from $286.38 billion a year earlier. But if the accelerated benefit payments that were made in September were included, outlays in October this year would have been $293 billion.

Receipts, primarily from income taxes, rose to $163 billion this year from $146 billion in October 2010.

(Reporting by Glenn Somerville, Editing by Chizu Nomiyama)

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