The US government budget deficit hit a new record in the just-completed 2008 budget year under the latest estimates from the Congressional Budget Office (CBO).
The record US$438 billion for the budget year that ended last week is up from US$162 billion posted last year. The previous record of US$413 billion was posted in 2004.
CBO said on Tuesday that with the economy in a slump, revenues dropped by almost 2 percent. Corporate income receipts dropped by US$65 billion, or nearly 18 percent. At the same time, individual income tax revenues declined by 1.6 percent.
The deficit is virtually certain to balloon even higher next year as the government sorts out the financial crisis and taps a US$700 billion Treasury fund to buy toxic mortgage-related securities.
The next president is likely to have to scale back campaign pledges as he inherits a likely deficit for next year exceeding US$500 billion. But neither Republican standard-bearer Senator John McCain nor Democratic nominee Senator Barack Obama has given much detail regarding what promises they will not be able to keep.
The latest figures for this year are somewhat of a surprise, registering more than US$30 billion more than the CBO’s update issued just last month and almost US$50 billion higher than what the White House predicted in July.
The numbers also amplify US President George W. Bush’s poor record on the deficit. Virtually every administration promise on the deficit has failed to come to pass.
Bush inherited a budget seen as producing endless huge surpluses after four straight years in positive territory. That stretch of surpluses represented a period when the country’s finances had been bolstered by a 10-year period of uninterrupted economic growth, the longest expansion in US history.
Those predictions were based on faulty models. Also, a recession in March 2001 and government spending to fight the war on terrorism helped push the deficit to its previous record in 2004.
Major rounds of tax cuts enacted in 2001 and 2003 have also contributed to the deficit and renewing them — and their US$200 billion-plus annual cost — when they expire at the end of 2010 would make it extremely difficult to balance the budget anytime soon.
A later promise to cut the deficit in half by the time Bush leaves office is in tatters, and virtually no one takes seriously his proposed path to a balanced budget by 2012.
The deficit numbers for last year represent about 3 percent of the size of the economy, which is the measure economists consider the most relevant. By that measure, the deficit is smaller than the deficits of the 1980s and early 1990s that led Congress and earlier administrations to cobble together deficit-reduction packages.
“Our children and grandchildren will be paying the price for years to come as they shoulder this growing burden of debt,” said House Budget Committee Chairman John Spratt Jr, a Democrat.
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