US budget deficit nears one trillion dollars in seven months

[Naveed Yaseen]

WASHINGTON: The US budget deficit accelerated in March to hit a record nearly one trillion dollars just halfway through the current fiscal year, as the government moved to bail out troubled institutions, government data showed on Friday.

The deficit for the first six months of the fiscal year which began on October 1 was 956.80 billion dollars, according to the Treasury’s monthly statement of receipts and outlays.

Receipts during the six-month period to March 2009 were 989.83 billion dollars while outlays amounted to nearly 1.95 trillion dollars, the data showed.

The March deficit of 192.27 billion dollars was higher than the 160 billion dollars expected by most analysts, coming on the back of money poured by President Barack Obama’s administration to rescue financial institutions.

All six months of the fiscal year so far recorded red ink. The last time the United States plunged into a consecutive six month deficit was during the October 2003-March 2004 period, officials said.

The nonpartisan Congressional Budget Office (CBO) forecast last month the budget deficit could hit 1.845 trillion dollars for the whole year based on Obama’s 3.5-trillion-dollar budget plan approved by Congress early this month.

The CBO said its budget deficit estimate for fiscal 2009, which ends on September 30, would be four times the 2008 record shortfall and amount to 13.1 per cent of the country’s total economic output.

The Obama budget forecasts a 1.750 trillion dollar deficit in fiscal 2009, but foresees that figure falling to 1.171 trillion dollars in 2010.

The plan sees the deficit soaring to the largest percentage of gross domestic product since World War II, but the president touted a string of cost savings designed to lay new foundations for the US economy.

It also includes an optimistic forecast that the struggling US economy will post robust growth next year, projecting a 1.2 per cent contraction in calendar 2009 but an expansion of 3.2 per cent in 2010.

The president’s plan includes investment in renewable energy, education, health care reform and is targeted to cut the deficit in half by the end of his current term in 2013.

Republican lawmakers have labeled the plan “a road map to disaster,” but Obama said that “by making hard choices and challenging the old ways of doing business, we will cut in half the budget deficit we inherited within four years.”

The Treasury data on Friday showed the administration used 293 billion dollars under the Troubled Asset Relief Program (TARP) to keep financial institutions afloat while another 60 billion dollars was injected into ailing mortgage finance giants Fannie Mae and Freddie Mac.

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