The US Treasury said in its monthly budget statement today that July saw a $29.16 billion budget deficit, a reversal of the $2.82 billion surplus seen in July 2001.
Ten months into the fiscal year ending in September, the year-to-date deficit totalled $147.20 billion, a reversal of the $171.77 billion surplus seen in the same period last year.
The Bush administration has blamed the war on terrorism and a sluggish economy for the return to annual deficits - which had been expected and were last seen in 1997.
Democrats, however, have pointed to the initial steps of the $1.35 trillion tax cut enacted last year as culprit.
July's figures were close to what analysts had been expecting. Private sector economists had projected a $29.71 billion gap, while analysts at the Congressional Budget Office called for a $32 billion shortfall.
For the fiscal year-to-date, individual income tax collections continued to fall, dropping 17.8 per cent to $707.88 billion. Individual taxes make up the largest portion of the US government's receipts and have foundered since last year's recession.
Spending on defence, however, continued to grow. Through July, defence expenditures were up 14.3 per cent, to $285.76 billion.