The New Nation - Internet Edition

AFP, Washington

The US government's budget deficit ballooned in fiscal 2008 to 438 billion dollars (322 billion euros), or 3.1 percent of GDP, as the economic downturn began to bite, the Congressional Budget Office (CBO) said yesterday.

The estimate compares to the 162 billion dollar shortfall that represented 1.2 percent of GDP in fiscal 2007, said the CBO, which monitors federal spending on behalf of the Senate and House of Representatives. "That is about 31 billion dollars higher than the 407- billion-dollar deficit CBO projected this summer, primarily due to lower-than-projected revenues and higher-than-expected spending for defense and deposit insurance," it said. In its Monthly Budget Review, the CBO said corporate income taxes fell by around 65 billion dollars during fiscal 2008, which ended September 30, a reflection of "weakness in corporate earnings throughout the fiscal year".

Defense spending meanwhile leaped by 11 percent, the biggest jump since 2004, while the Federal Deposit Insurance Corporation paid out 23 billion dollars to cover insured deposits at failed financial institutions.

In July, the CBO's counterpart at the White House, the Office of Management and Budget, said the budget deficit would leap to a record 482 billion dollars, largely due to an emergency economic stimulus and a slowing economy.

Its forecast indicated that the next US president, who will take office in January following the November 4 election, will inherit some tough spending decisions from the very first day in the White House.