The US administration yesterday blamed the slowdown in the economy for a projected increase of the budget deficit to a near-record level of $410 billion this year, or 2.9 per cent of gross domestic product.
The expected jump in the deficit was announced as President George Bush sent to Congress a $3,100 billion (€2,091 billion) federal budget for 2009 - the last and largest of his eight-year presidency - claiming that it "protects America and encourages economic growth".
The spending plan, which is likely to set off an intense tug-of-war with Democrats who control Congress, includes a 7.5 per cent increase in funding for the military to $515 billion and a cut of about $200 billion over five years in government healthcare programmes such as Medicare and Medicaid.
The new budget estimates that the deficit will rise from $162 billion in 2007, to more than double that amount, or $410 billion, in 2008, and $407 billion in 2009. The projected increase was largely pinned on the recent slowdown in the economy, which has forced the administration to negotiate $150 billion of measures to stimulate growth through rebates to consumers and investment incentives for businesses.
"The primary reason for increasing deficits in the near term is the president's economic growth package and an expected slowing of receipt growth, due to an expected reduction in corporate tax receipts from recent high levels," the 2009 budget proposal said.
- ( Financial Timesservice)
