U.S. Deficit Estimated at $1.3 Trillion in Fiscal 2011: CBO

The U.S. government's budget deficit in the fiscal year that ended Sep. 30 was $1.3 trillion, equal to 8.6 percent of gross domestic product, the nonpartisan Congressional Budget Office said Friday.

At $1.3 trillion, the fiscal 2011 budget imbalance matched the fiscal 2010 total, the CBO said, when it was equal to 8.9 percent of GDP.

In fiscal 2009, the debt equaled 10 percent of the U.S. economy, the CBO said.

The latest deficit figures come as a special, bipartisan committee of Congress tries to find ways to reduce budget deficits that have been well over $1 trillion annually.

The CBO's estimate for the 2011 budget deficit was in line with forecasts. The U.S. Treasury Department will issue the official fiscal 2011 deficit number later this month, the CBO said.

The CBO estimate was about $14 billion more than it had projected in August. Spending was about $3 billion higher and revenues about $11 billion lower than expected, the CBO said.

Receipts from corporate income taxes fell by $11 billion in September, the CBO said, adding that the drop may reflect filing and payment delays due to Hurricane Irene and other natural disasters. The CBO said tax breaks for businesses enacted last year reduced corporate payments to the federal treasury.

Throughout the year, revenue increases stemming from higher profits were offset by revenue reductions resulting from tax legislation enacted in 2010, particularly provisions that accelerated businesses' deductions for depreciation, the CBO said.

CBO said payments for interest costs rose by 17 percent in fiscal 2011, a $38 billion increase over 2010, largely because of the big increase in government debt over the past year.

Federal spending for unemployment benefits fell by 24 percent, or $39 billion, in 2011 because fewer people filed for benefits and because Congress allowed a $25 boost in weekly unemployment benefits to expire.

CBO said defense spending rose by about 1 percent in 2011, while spending on Medicare and Social Security health and retirement programs rose by 4 percent in 2011.

(Reporting by Richard Cowan and Donna Smith; editing by Philip Barbara)