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Federal budget deficit totals $974B through July
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WASHINGTON (AP) — The U.S. federal budget deficit increased $70 billion in July and is on track to top $1 trillion for the fourth straight year.

The deficit for the first 10 months of the 2012 budget year, which ends Sept. 30, totaled $974 billion, the Treasury Department said Friday. That's 11.5 percent less than the $1.1 trillion gap in the same period last year.

A slightly better economy has boosted income tax receipts, which have increased 6 percent so far this year. Corporate income tax receipts rose nearly 30 percent compared to a year ago. Spending has dipped 0.3 percent.

Still, President Obama will almost certainly face re-election after running $1 trillion deficits each year in office. GOP candidate Mitt Romney has criticized Obama for failing to cut the deficit in half, as he pledged to do during his 2008 campaign.

The White House last month forecast that the budget gap will total $1.2 trillion this year, down from $1.3 trillion in 2011.

This year's gap is equal to about 7.8 percent of the U.S. economy, down from 8.5 percent in 2011. The Obama administration expects the deficit to fall just under $1 trillion next year, to $991 billion.

Obama and congressional Republicans are at odds over how much to spend, where to cut and whether tax increases should be on the table. Republicans control the House, while Democrats have a slim majority in the Senate.

That gridlock could push the economy over the "fiscal cliff" at year's end. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget agreement.

Both parties oppose the automatic spending reductions because they include deep cuts in defense. If the tax increases and spending cuts take effect, many economists say a recession could follow.

Obama has proposed letting tax cuts approved in 2001 and 2003 expire for couples making more than $250,000. That would generate more than $700 billion over 10 years. He also wants to set a 30 percent tax rate on taxpayers making more than $1 million. That would add $47 billion to government revenue over 10 years.

Republicans have rejected the tax increases and want deeper cuts in government programs. The GOP-controlled House has approved a budget that calls for deep cuts in Medicare and other programs and a new round of tax cuts.

GOP candidate Mitt Romney has also promised to cut spending in order to reduce the budget gap. He has proposed to cap spending at 20 percent of gross domestic product. GDP is the broadest measure of the economy's output. Spending currently equals about 24 percent of GDP.

Romney hasn't specified many of the cuts he would make, but has proposed reducing the federal government workforce by 10 percent and eliminating $1.6 billion in Amtrak subsidies.