World

US budget deficit seen at $438bn

by Dave Keating | September 10, 2008 at 02:07 am

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According to the latest Capitol Hill estimates, the US government will run a near-record deficit of $407 billion this year. However the actual figure is likely to be much larger than this, because it is not taking into account the recent bailout of the nation's two biggest mortgage lenders.

It also warns the deficit could go higher as the figure does not take into account possible government costs for taking over Fannie Mae and Freddie Mac.

The CBO added the US government will run a deficit of $407bn this year.

During the next fiscal year - starting on 1 October - a "turbulent" economy would cut revenues, the CBO warned.

'Increase in spending'

The CBO estimate for 2009 does not include the possible costs of rescuing the two stricken giant mortgage firms, which was announced on Sunday.

Its assessment of $438bn would breach the 2004 record of $413bn and far outstrip the $161bn budget shortfall last year.

"The significant expansion in the deficit is the result of a substantial increase in spending and a halt in revenue growth," the CBO report said.

In 2008, the CBO estimates, federal spending will be 8.3% higher than it was in 2007; at the same time, total revenues will be less than they were in 2007.