Federal Deficit Hits $1.38 Trillion Through August

WASHINGTON (AP) - The federal deficit surged higher into record territory in August, hitting $1.38 trillion with one month left in the budget year.

The Treasury Department says the deficit last month was $111.4 billion, below the $152 billion that economists expected.

Still, the imbalance added to a flood of red ink already accumulated through a severe recession and massive spending needed to stabilize the banking system.

The Obama administration last month trimmed its forecast for this year’s deficit to $1.58 trillion, from an earlier $1.84 trillion. The recovery of the banking system led to the reduced estimate as it meant the administration did not need to get an additional $250 billion in bailout support for banks.