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CBO: Federal spending dropping but trillion-dollar deficit still likely

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The federal government ran a $60 billion deficit in June and is already more than $900 billion in the red this fiscal year, but there is some bright news: basic government spending appears to be dropping, the Congressional Budget Office estimated Monday.

CBO said the government has paid out $2.7 trillion so far in fiscal year 2012, about the same level as it had by this point in fiscal year 2011. But when technical adjustments from the 2008 Wall Street bailout are subtracted, spending has actually dropped 2 percent.

That news comes after a year and a half of fierce battles between Republicans on Capitol Hill, who have fought for deeper spending cuts, and President Obama, who has fought for more money for his priorities.

CBO said Medicaid, education and unemployment benefit spending are both down significantly, chiefly because Mr. Obama’s stimulus has winded down and its higher spending levels are expiring. Defense spending is also down in 2012.

On the other side, revenue ticked up, running 5 percent higher than at this point in fiscal year 2011, powered in part by workers earning higher wages and thus more money being withheld by the government.

With nine months elapsed, the deficit this fiscal year stands at $905 billion, compared to $971 billion in 2011.

Still, that total makes it almost certain the government will top $1 trillion in arrears by the end of the fiscal year, which would mark the fourth straight year of trillion-dollar deficits.

CBO’s figures are estimates. Final exact statistics are due from the Treasury Department later this month.

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