US budget deficit reaches $1.4 trillion

• Source: Global Times
• [01:34 October 19 2009]
• Comments

The US government closed its 2009 fiscal year with a record $1.41 trillion budget deficit as it poured resources into containing a serious financial crisis that plunged the nation into recession.

The deficit was some $962 billion higher than the previous year and amounted to 10 percent of US GDP, the highest since 1945, according to officials on Friday.

The huge jump in the budget shortfall stemmed from both declining revenues and massive spending in a fiscal stimulus to jolt the world's largest economy from a prolonged recession following the worst financial crisis in decades.

Officials, however, pointed out that the deficit was $162 billion lower than the $1.58 trillion forecast by the administration of President Barack Obama, who inherited the flood of red ink from his predecessor George W. Bush.

"The financial year 2009 deficit was largely the product of the spending and tax policies inherited from the previous administration, exacerbated by a severe recession and financial crisis that were underway as the current administration took office," Treasury Secretary Timothy Geithner and White House budget chief Peter Orszag said in a joint statement.

The deficit was lower than projected, "in part because we are managing to repair the financial system at a lower cost to taxpayers," Geithner said.

"But future deficits are too high, and the president is committed to working with Con-gress to bring them down to a sustainable level as the economy recovers," he said.

The numbers come as Obama and Democrats in Congress are trying to approve an overhaul of the US healthcare system, without adding to the deficit. A recent analysis of one of the major reform bills said the measure would save $81 billion over 10 years.

Obama's Republican critics have stepped up their calls for the president to abandon his key reform plans to remake US healthcare and combat climate change that may cost several trillion dollars.

Judd Gregg, the Republican leader of the Senate budget committee, predicted Obama would be saddled with "deficits approaching $1 trillion for each and every one of the next 10 years."

"These annual deficits translate into a buildup in debt that will crush our economy."

But House of Representatives budget committee chairman John Spratt said, "It would be harmful to try to balance the budget at a time when the economy has not fully recov-ered and so many Americans are still struggling."

"So as the economy recovers, we will need to turn our focus back to deficit reduction."

Meanwhile, Senator Kent Conrad, the Democratic chairman of the Senate Budget Committee, said the deficit announcement "again highlights the fiscal mess handed to the Obama administration" by the administration of former president George W. Bush.

AFP/Global Times