(AFP) – Jul 28, 2008
WASHINGTON (AFP) — The US government's budget deficit is expected to balloon to a record 482 billion dollars in the next fiscal year, largely due to an emergency economic stimulus and a slowing economy, a White House report showed Monday.
The report revealed that the Office of Management and Budget (OMB) had trimmed its budget deficit prediction for 2008 by 21 billion dollars to 389 billion.
The OMB cited "higher inflation and more modest expectations regarding economic growth" in revising its deficit projections.
Its forecast indicates that the next US president, who will take office in January following November's presidential election, will inherit some tough spending decisions from the very first day in office.
The projected 2009 black hole in the government's accounts would represent over three percent of the world's biggest economy which is presently valued at 14 trillion dollars.
Officials of President George W. Bush's administration stressed the US economy has continued to expand -- it grew a lackluster 1.0 percent during the first quarter -- and said it remains fundamentally sound despite a lengthy housing market slump, a related credit crunch and booming world oil prices.
The estimated budget gap for the fiscal year beginning on October 1 was significantly larger than the 407-billion-dollar shortfall in the 2009 budget Bush requested from Congress earlier this year.
White House spokeswoman Dana Perino said that a swollen US deficit is "the price that we pay in order to help improve the economy."
She said the White House still stood by its goal of achieving a balanced budget by 2012, although the Bush administration departs office in January.
"We hope to pull out of this economic downturn over the next few months because of the stimulus package," Perino said.
A rebound in the US economy in future months, or next year, could trigger a reduction in the expected budget deficit. If the economy expands at a faster pace, it would likely boost tax revenue.
The Bush administration this year provided a giant economic stimulus of around 168 billion dollars, stuffed with one-off tax rebates, in a bid to jump-start the flagging economy.
The tax rebates, which were received by tens of millions of US households, contributed to a hefty spike in government spending.
The White House had initially projected a deficit of 410 billion dollars in the current fiscal year and 407 billion in the 2009 fiscal year. Government fiscal years run from October 1 to September 30.
The predicted fiscal 2009 budget shortfall of 482 billion dollars would eclipse the 2004 record deficit of 413 billion dollars, but as a percentage of gross domestic product (GDP) it would be smaller than the 3.6 percent of GDP marked by the 2004 deficit.
The deficit had been trimmed in recent years to 162 billion dollars in fiscal 2007.
The release of the latest budget projections triggered a fresh salvo of political jabs.
"This in a nutshell is the Bush administration's legacy: Mr. Bush entered office with the biggest surpluses in history and leaves with the biggest deficits," said John Spratt, the Democratic chairman of the House of Representatives Budget Committee.
Administration officials countered that the Bush administration had been forced to battle a recession during the president's first term, respond to the September 11, 2001 terrorist attacks, and establish the Department of Homeland Security.
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