Lower tax revenue and massive government spending on the bank bailout pushed the federal deficit to $765 billion in the first five months of the budget year, well on its way to hitting the Obama administration’s projection of a record annual imbalance of $1.75 trillion.

The Treasury Department also said Wednesday that the February deficit reached $192.8 billion. That’s a record for the month and up 10 percent from a year ago, but below analysts’ expectations of $205.7 billion.

With seven months left in the current budget year, which ends Sept. 30, the deficit already has shattered last year’s record annual gap of $454.8 billion.

The huge deterioration in the government’s finances is due to the recession, which has cut into tax revenues, and the large amounts of money being spent from the $700 billion financial rescue plan that Congress passed in October.

The slow economy sharply reduced the government’s tax revenue last month to $87.3 billion, 17 percent below the previous year. The government has collected $860.8 billion in revenue through February, 11 percent below the year-ago period.

Spending, meanwhile, was flat last month at $280.1 billion. But total spending in the first five months of the budget year jumped 32 percent to $1.63 trillion compared with the same period last year.

The red ink this year also will reflect the $787 billion economic stimulus package that Congress passed last month in an effort to jump-start an economy in the grips of the worst recession in decades. None of that spending is included in the February figures.

The administration’s first budget projects the deficit will drop to $1.17 trillion in 2010, and then to $912 billion in 2011. It projects the deficit will plunge to $581 billion in 2012, and $533 billion in 2013, the year the administration has promised to cut the deficit in half.

But many private forecasters believe the deficit projections, gigantic as they are, will prove optimistic because the administration based them on economic assumptions that are too rosy. If the rebound from the current recession proves to be slower than the administration is currently forecasting, it will mean that tax revenues will be lower and future deficits higher.

(Source: Associated Press)