US budget gap narrows in January

The US government chalked up a smaller-than-expected budget deficit in January, the Treasury says, though the gap is projected to hit a record $US1.56 trillion ($A1.73 trillion) in 2010.

The deficit of $US42.634 billion was less than the $US46.0 billion expected by most economists and compared with a deficit of 91.41 billion dollars in December, according to the Treasury's monthly report.

The January shortfall stemmed from government spending of 247.87 billion dollars and revenue of $US205.24 billion, the report said.

For the first four months of the 2010 fiscal year that began October 1, 2009, the deficit widened to $US430.7 billion, an 8.8 percent jump from the same period the previous year, the Treasury said.

Deficit to top $US1.41 trillion

The deficit for the 2009 fiscal year that ended September 30 was $US1.415 trillion and the White House projected earlier this month that the gap would widen to a record $US1.556 trillion in 2010.

Measured against the size of the economy, the budget shortfall in 2010 would equal a hefty and unsustainable 10.6 percent of gross domestic product, the broad measure of a country's economic output.

Officials say a sustainable deficit-GDP ratio is about three percent.

Concerned about the ballooning deficit, President Barack Obama will sign Thursday an executive order establishing a bipartisan commission to find ways to reduce the gap, the White House said.

Obama has chosen Democrat Erskine Bowles, the White House chief of staff for ex-president Bill Clinton, and former Republican senator Alan Simpson of Wyoming to head the panel, the official said.

The president repeatedly has complained that plans for a congressionally mandated fiscal commission were killed in the Senate -- by Republicans who had previously backed the idea as a way of trimming huge US deficits.

The congressionally appointed commission would have had more teeth and the power to force lawmakers to vote on its recommendations.