Treasury: Deficit Hits New Record in Just 3 Months

Deficits of this size would be records in dollar terms and the largest as a percentage of the overall economy since the government was spending massive amounts to fight World War II. Still, economists generally support the massive government effort.

In this Aug. 28, 2008 file photo, containers are loaded at the Maresk Lines terminal at the Port of...

In this Aug. 28, 2008 file photo, containers are loaded at the Maresk Lines terminal at the Port of Los Angeles. The Commerce Department said Tuesday, Jan. 13, 2009, the trade deficit plunged to the lowest level in five years in November as a deepening recession slashed demand for oil by a record amount. (AP Photo/Damian Dovarganes, File)

(AP)

"A lot of us are pretty nervous about the deficits, but the fact is that if you look at the state of the economy, the risks of not doing anything are greater than the risks of doing something," Wyss said.

The deficit through December includes $247 billion that has been spent on the $700 billion financial rescue program that Congress passed on Oct. 3 to deal with the most serious financial crisis to hit the country since the 1930s.

Much of that money has been spent injecting fresh capital into banks in an effort to repair their balance sheets and encourage them to resume more normal lending. Part of the bailout funds also went to shore up insurance giant American International Group Inc. and the auto industry, with both General Motors Corp. and Chrysler LLC getting support.

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The administration has committed the first half of the $700 billion rescue fund. On Monday, President George W. Bush, acting at the behest of Obama, asked Congress to release the second $350 billion.

In an effort to deal with growing congressional unhappiness over how the program has been run, Obama has pledged to impose tighter controls on banks that receive the money to make sure they use the funds to increase lending, to devote greater resources to combatting mortgage foreclosures, and to help consumers and businesses obtain loans.

The Treasury said in the first three months of the budget year that began Oct. 1, revenues totaled $547.4 billion, down by 9.7 percent from the year-ago period, mostly reflecting lower corporate tax collections because of the weak economy. Spending over that period totaled $1.03 trillion, an increase of 44.8 percent from a year ago.

Supporters of the bailout have argued that the government will get the bulk of the money back since it is being used to buy assets, mainly preferred stock in financial institutions. Once markets stabilize, the banks will buy their stock back from the government.