US faces yawning budget deficit

WASHINGTON - The U.S. central government's budget deficit for the first 11 months of the 2012 fiscal year topped 1.16 trillion U.S. dollars by the end of August, fresh evidence of the mounting fiscal pressure of the world's largest economy, the U.S. Treasury Department said on Thursday.

This was the fourth consecutive year that the U.S. central government's budget deficit has surpassed 1 trillion U.S. dollars under President Barack Obama's watch. The current fiscal year will end by September 2012.

The U.S. federal government registered a 190.5 billion dollars budget deficit in August, as it raked in 178.9 billion dollars, but spent 369.4 billion dollars in the same month.

Republican presidential candidate Mitt Romney has criticized Obama for failing to deliver on his promise made in 2009 of cutting the U.S. federal government's deficit in half by the end of his first term.

The U.S. public debt surged after the burst of the financial crisis and economic recession. The federal government's annual deficit hit 1.41 trillion U.S. dollars in the 2009 fiscal year, 1.29 trillion dollars in the 2010 fiscal year and 1.3 trillion dollars in the 2011 fiscal year.

Wars in Afghanistan and Iraq, former President George W. Bush's tax cut policies, economic stimulus measures under the Obama administration to tide over the economic downturn, and ballooning entitlements expenses in an aging society all contributed largely to the spiking U.S. public debt hovering at around 16 trillion U.S. dollars.

Global rating agency Moody's Investors Service warned on Tuesday that it could strip the United States of its triple-A credit rating and would cut the "Aaa" on the U.S. government debt by one notch if U.S. Congress and the White House don't reach a budget deal.

"Budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the U.S. government's Aaa rating and negative outlook," the ratings firm said in a statement.

"If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable. If those negotiations fail to produce such policies, however, Moody's would expect to lower the rating, probably to Aa1," said Moody's in the statement.

Moody's still rated the world's largest economy as the triple-A credit, but with a negative outlook, as it has warned U.S. policymakers to enhance the financial sustainability to retain its financial reputation.

U.S. Congressional leaders on July 31 inked an agreement of a short-term spending bill to extend government funding for six months after it runs out by October 1 and avoid another government shutdown, but the agreement stopped short of listing long-term fiscal adjustment goals to slash the ballooning U.S. public debt.

This type of stop-gap measure has been frequently used in past years as Republicans and Democrats remained at odds over budgetary and tax issues, and has attracted sharp criticism both at home and abroad.

Another global rating agency Standard & Poor's (S&P) stripped the United States of its gold-plated credit rating last year, which should serve as a warning on U.S. fiscal sustainability and the effectiveness of the Beltway political system to address the severe fiscal challenge.