Budget Deficit Shrinks To $349 Billion In Last Four Months The U.S. budget deficit registered at $349 billion for the last four months, marking a $70 billion decline from the same period a year ago, according to the Congressional Budget Office. In its monthly budget review, the CBO said the deficit has shrunk due to a combination of factors. Corporate and individual income tax revenue is up, while spending on Medicaid, unemployment benefits and other programs is down. The CBO continues to project that the deficit for 2012 will hit roughly $1.1 trillion. The deficit was $1.3 trillion in 2011. The office, however, cautioned that pending measures in Congress could inflate the 2012 number -- for instance, a possible extension of the payroll tax cut could have "a significant impact" on the 2012 deficit, the CBO said in a statement.