The US budget deficit is expected to hit a record US$1.4 trillion this year, some US$950 billion greater than the shortfall recorded last year, the Congressional Budget Office (CBO) said on Wednesday.
Congress’s non-partisan financial watchdog said the forecast federal deficit for the fiscal year that ended last month was the highest shortfall — relative to the size of the economy — since 1945.
The deficit resulted from both declining revenues and increased spending, stemming mostly from aid to the financial system and fiscal stimulus to jolt the world’s biggest economy from a prolonged recession, the CBO said.
Revenues this year were almost US$420 billion, or 17 percent, below receipts chalked up last year, the lowest level in more than 50 years, it said.
At the same time, outlays increased by more than US$530 billion, or 18 percent, last year to the highest level also in more than half a century.
The federal deficit last year was US$459 billion.
The deficit estimates were based on data from daily statements from the US Treasury and CBO projections.
Treasury officials said they would report the actual deficit in the middle of this month.
The White House projected in August that this year’s fiscal budget deficit would reach US$1.58 trillion. It also estimated a whopping US$9.05 trillion deficit from next year to 2019, a US$2 trillion increase from the February estimate made a month after US President Barack Obama entered office and inherited a gaping deficit from his predecessor, former US president George W. Bush.
The CBO said the federal government recorded a deficit of US$31 billion last month, compared with a surplus of US$42 billion in the same month last year.
“Quarterly payments of estimated individual income taxes and corporate income taxes typically result in a surplus for September. However, lower revenues and increased spending resulted in the 12th consecutive month of budget deficits,” it said.
Meanwhile, Obama’s plan to overhaul the US health care system got a boost on Wednesday when congressional budget experts said it would reduce the country’s ballooning budget deficit.
The CBO said the health care reform plan currently before the Senate Finance Committee would reduce the budget deficit by US$81 billion over 10 years at a total cost of US$829 billion.
That finding was in line with Obama’s pledge that his health reform push would not increase budget deficits by “one dime.”
The legislation that would extend health insurance to the around 46 million people who currently lack coverage in the US would also likely lead to “continued reductions in federal budget deficits,” the CBO said.
Senator Max Baucus, who chairs the panel and has played a key role in designing the legislation, hailed the findings as he seeks to obtain the backing of at least one Republican, Senator Olympia Snowe, and convince centrist Democrats who remain undecided.
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