Federal Deficit Hits October Record of $176 Billion

deficit

The U.S. budget deficit for October surged to $176 billion, a record for the month, the Treasury Department announced today.

During the month, the government racked up $311 billion in outlays compared with $135 billion in receipts.

The October numbers mark the first month for the new fiscal year after the U.S. wrapped up the 2009 fiscal year that ended on September 30 with a record-high $1.4 trillion budget deficit due to increased government spending to stop the recession and the financial crisis. The final deficit for the 2009 fiscal year was equal to 10 percent of the nation's GDP, the highest shortfall relative to GDP since 1945, the final year of World War II.

The rising deficit has caused some concerns in Asia, where President Obama is set to start a weeklong trip. On his visit to the Pacific Rim the president will visit the United States' two largest foreign creditors – China and Japan.

In recent months the country's soaring deficit has prompted fears that China and Japan might reduce their holdings of treasuries, but neither country has shown signs of a drawdown. The most recent numbers revealed that during August China decreased its holdings by $3 billion to $797 billion, while Japan raised its holdings by $6.5 billion to $731 billion.

Along with his stops in China and Japan the president will also visit Singapore and South Korea -- the four countries combined own 47 percent of America's foreign-held debt.

In an interview with CNBC conducted at the APEC summit in Singapore, Treasury Secretary Tim Geithner vowed that the United States' fiscal situation will improve as the economy does so, too.

"As growth recovers and as the temporary support for the economy we had to put in place to solve the crisis, as that winds down then we'll be able to start to put our fiscal position on a path to a more sustainable position," he said. "That's important for the United States, important for global financial stability. Recovery is not going to be strong enough unless people are confident in that. And I think you can see -- again if you look at broad behavior over the last several months you see a lot of confidence in basic fundamental stability of the U.S. financial system and a lot of confidence in the quality of our financial stewardship."

The Treasury chief noted that as banks repay bailout money, the government can then use those repayments to reduce the public debt.

"We are likely to have to borrow substantially less than we initially anticipated to help repair the damage to our financial system," he said. "You've seen capital start to come back to the government. Banks are repaying with interest. We're likely to see significant repayments ahead. That's gonna allow us to devote greater resources to debt reduction."

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