Published: February 4 2008 15:02 | Last updated: February 4 2008 15:02
The Bush administration on Monday blamed the slowdown in the economy for a projected increase of the US budget deficit to a near-record level of $410bn this year, or 2.9 per cent of gross domestic product.
The expected jump in the deficit was announced as George W. Bush sent to Congress a $3,100bn federal budget for 2008 – the last and largest of his eight-year presidency.
The 2008 budget estimates that the deficit will rise from $162bn, or 1.2 per cent of gross domestic product, in 2007, to more than double that amount, or $410bn, in 2008 and $407bn, in 2009. This reverses a trend which has seen a gradual reduction in the US fiscal gap from a record deficit of $413bn in 2004. When Mr Bush took office in 2001, the US was recording a budget surplus.
The increase in the deficit was largely pinned on the slowdown in the US economy, which has forced the administration and Congress to agree on a $150bn package of measures to stimulate the economy through rebate cheques 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 2008 budget said.
John Spratt, a South Carolina Democrat who chairs the House budget committee, was quick to offer his reaction to the plan. “Today’s budget bears all the hallmarks of the Bush legacy - it leads to more deficits, more debt, more tax cuts, more cutbacks in critical services,” Mr Spratt said.
Copyright The Financial Times Limited 2008
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