The US government reported a $159 billion budget deficit for the 2002 fiscal year less than two weeks before key congressional elections.
The dramatic swing back to deficits after four years of surpluses reflected many factors, including slower economic growth, a drop in capital gains taxes because of the stock market's fall, increased spending on the military and homeland security after the September 11th attacks, and the $1.3 trillion 10-year tax cut passed in 2001.
With the elections approaching, congressional Democrats seized on the announcement as proof Mr George W. Bush and his Republican allies have abandoned fiscal discipline to fund tax cuts for the rich.
Polls show the troubled US economy and other domestic issues are the top concerns of voters.
In 2001, the government ran a $127 billion surplus and in 2000 it posted a record $236.9 billion surplus. The budget gap for the fiscal 2002 year is the first since 1997's deficit of $22 billion and the largest since the $164 billion imbalance in 1995.
White House Budget Director Mr Mitch Daniels said the latest budget numbers underscored the need to control federal spending.
"Unexpected new defence and homeland security spending is needed to protect America from new threats. Given these two developments, it is absolutely essential that we set aside business as usual and keep tight control over all other spending," Mr Daniels said.