U.S. Deficit to Reach $438 Billion in 2009, CBO Says

This year's shortfall will total $407 billion, the agency said today in a biannual report. The Bush administration estimated in July that next year's deficit will be $482 billion.

While it is ``uncertain'' whether the economy is currently in recession, it will likely see ``several more months of very slow growth'' that are ``similar to conditions during previous periods of mild recession,'' the report says.

The agency said it expects the nation's gross domestic product to grow in real terms by 1.5 percent this calendar year and 1.1 percent next year. The agency forecasts the unemployment rate will top 6 percent through next year while so-called ``core'' inflation will be 2.4 percent at an annual rate over the next 18 months.

``The recent increase in the deficit is the result of the slow economy and the bipartisan decision to enact a stimulus package,'' said White House Budget Director Jim Nussle in a statement today. ``Driving down the deficit and balancing the budget is achievable if we help the economy grow by keeping spending in check.''

``The next president will be inheriting a budget and economic outlook that is far worse than most people realize,'' said Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat. The report ``means more borrowing from China, more borrowing from Japan and more borrowing from oil exporters like Saudi Arabia.''

A Shortfall

The agency said it expects the government to run annual deficits topping $400 billion through 2010 when it says the shortfall will be $431 billion.

The deficit is the difference between how much the government spends and receives in tax revenue in a single year. The Treasury Department covers the gap by borrowing from investors here and abroad. That money is tacked onto the national debt, which now totals about $9.6 trillion. Last year's shortfall was $162 billion.

The agency said the deficit for the fiscal year that ends this month will be more than twice the size of last year's shortfall because of an 8.3 percent increase in federal spending and revenue that is likely to be lower than last year.

Tax Revenue

Tax revenue will fall 0.8 percent from last year primarily because of the cost of tax-rebate checks sent earlier this year to millions of Americans as part of an economic stimulus plan.

Corporate tax receipts will decline this year by 15 percent, the report says. Spending is up primarily because of a 10 percent increase in defense spending along with smaller rises in Social Security, Medicare and Medicaid costs.

The deficit next year would be the largest ever in dollar terms. As a share of the economy, which economists say is a better measure of a deficit 's relative size, it would be the biggest since 2004.

CBO said next year's $438 billion deficit would equal 3 percent of the nation's gross domestic product; in 2004, when the deficit totaled $412 billion, it equaled 3.6 percent of the economy.