US budget deficit hits record $1.4 trillion
WASHINGTON: The US government closed its 2009 fiscal year with a record 1.417 trillion dollar budget deficit as it poured resources to contain a serious financial crisis that plunged the nation into recession.
The deficit was some 962 billion dollars higher than the prior year and amounted to 10 percent of US gross domestic product (GDP), the highest since 1945, officials said Friday.
The huge jump in the budget shortfall stemmed from both declining revenues and a massive ramping up of spending in a fiscal stimulus to jolt the world's largest economy from a prolonged recession following the worst financial crisis in decades.
Receipts for the fiscal year that ended in September totaled 2.105 trillion dollars while outlays were 3.522 trillion dollars, the Treasury said.
Officials, however, pointed out that the deficit was 162 billion dollars lower than the 1.580 trillion dollars 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 under way 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 Congress to bring them down to a sustainable level as the economy recovers," he said.
Orszag said "it was critical that we acted to bring the economy back from the brink earlier this year," referring to the financial crisis that resulted from a housing market meltdown.
The crisis plunged the country into recession in December 2007 and led to the collapse of financial and investment houses and a massive government bailout of some of the institutions.
"As we move from rescue to recovery, the president recognizes that we need to put the nation back on a fiscally sustainable path," Orszag said.
As part of the fiscal year 2011 budget policy process, he said the Obama administration was considering proposals to put the country "back on firm fiscal footing."
Obama's Republican critics have stepped up their calls for the president to abandon his key reform plans to remake US health care and combat climate change that some estimate could cost several trillions of dollars.
"Congress simply can?t continue acting like a teenager on a spending spree with his parent?s credit card with no regard to who pays the bill," said US Senate Republican leader Mitch McConnell.
"We need to listen to the American people: No more spending money we don?t have," he said.
Judd Gregg, the Republican leader of the Senate budget committee, predicted the Obama administration would be saddled with "deficits approaching one trillion dollars for each and every one of the next 10 years."
"These annual deficits translate into a build-up 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 recovered 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.