US budget deficit could cross $1 trillion in 2009

The US budget deficit could be well over $1 trillion in 2009, even before President-elect Barak Obama announces his massive stimulus plan as part of the government's ongoing efforts to restore consumer confidence and pull the economy out of a tailspin.

The Congressional Budget Office will soon release its projections for fiscal 2009 budget deficit.

Reports, meanwhile, quoted experts as saying that the deficit would surpass all previous levels, including the $455 billion set in 2008, and could even hit $1 trillion as the economic recession drains federal revenues.

That estimate may include some of the impacts from the $700 billion bailout announced by the Bush administration for the financial sector and US auto industry, but most definitely exclude Barak Obama's projected stimulus package of around $775 billion over two years.

Obama is reported to be mulling tax cuts for business and individuals to the tune of around $300 billion, and rolling out infrastructure projects and other spending to jump start the US economy out of its recession.

Agency reports quoted North Dakota senator Kent Conrad, who is also the chairman of the Senate Budget Committee, as saying that a $1 trillion deficit was not just a possibility for 2009 but additionally an average of $1 trillion could be added to the national debt annually, over the next decade.

President-elect Obama had on Tuesday said he expected to inherit a deficit approaching $1 trillion, and that his administration would have little option but to make tough budget choices. However, economists warn that the present is not about the US tightening its belt, since the current economic crisis are very dangerous and it would be a mistake to adopt conservative budget balancing policies. They say the deficit would also balloon from the expected steep drop in tax revenue. Reports said that to finance the deficit, the US government would have to issue an unprecedented amount of debt of around $2 trillion for fiscal 2009.

Following a meeting with his team of economic advisors, Obama said he would completely focus on jump starting the economy, saving or creating three million jobs most of which would be in the private sector, and lay a solid foundation for future growth.

Obama said Peter Orszag, who will head the Office of Management and Budget in his administration, has forecast that the US would have a budget deficit of $1 trillion "even before we start the next budget."

"We're already looking at a trillion-dollar budget deficit or close to a trillion-dollar budget deficit, and that potentially we've got trillion-dollar deficits for years to come, even with the economic recovery that we are working on at this point," Obama said. The President-elect said he would not expect the American people to support this critical effort unless his administration takes extraordinary steps to ensure that the investments are made wisely and managed well.

Obama reportedly portrayed himself as the unfortunate heir to President Bush's fiscal "irresponsibility", by saying the outgoing President's policies have doubled the national debt over the past eight years and delivered "the worst economic crisis that we've seen since the Great Depression."

President Bush's tax cuts virtually eliminated surpluses left behind by the Clinton administration and ensured the annual budget deficit soar to a record $413 billion in 2004, which later dropped to $162 billion in 2007 but soared again to $455 billion in the fiscal year that ended in September 2008, mainly on account of a small stimulus package enacted last February that put the brakes on tax revenues and increased expenses in Iraq and Afghanistan.