But...it is not a surprise.

By Jeremy Pelofsky and David Lawder


WASHINGTON (Reuters) - The Bush administration on Monday projected the U.S. budget deficit will soar to a new record of nearly half a trillion dollars in fiscal 2009 as a housing-led economic slowdown cuts into government revenues.

The economic and fiscal deterioration will complicate efforts to balance the budget and pose challenges to the next president, who will take over the White House in January.

The economy has been hobbled by the collapsing housing market and soaring food and energy prices. In February, the Democratic-controlled Congress and President George W. Bush approved a $168 billion, two-year stimulus plan to ward off recession.

"The nation's economy has continued to expand and remains fundamentally resilient," the White House mid-session budget report said. Still, "the housing slump, tighter conditions in credit markets and continuing energy price shocks have cut into the expected growth rate."

With the slowing economy and the cost of the economic stimulus plan, the White House said it thinks the deficit will hit a record $482 billion in fiscal 2009, which starts October 1. However, it cut its forecast for the current fiscal year to $389 billion.

In February, the administration forecast the deficit would hit $410 billion this year and drop to $407 billion in 2009. The new report said the budget deficit would fall to $178 billion in 2010, and start producing surpluses in 2012.

The White House also lowered its economic growth forecast to 1.6 percent for 2008 -- in line with the private-sector Blue Chip forecast. However, the administration was more optimistic for 2009, seeing 2.2 percent growth while the Blue Chip forecast was for 1.7 percent.

In November, the White House forecast gross domestic product would expand 2.7 percent in 2008 and 3 percent in 2009. In its latest report, the administration forecast inflation at 3.8 percent this year and then moderate to 2.3 percent.

BUDGETARY STRAINS

In addition to the efforts to give a lift to the economy, the budget has been sapped by the prolonged wars in Iraq and Afghanistan that came as Bush's tax cuts went into effect, and economists have been warning about an expected rise in health care spending as members of the baby boom generation retire.

Democrats have blasted the Republican administration for squandering budget surpluses and nearly doubling the national debt, from $5.6 trillion when Bush took office in 2001 to over $9.5 trillion now.

"Under its policies, the largest surpluses in history have been converted into the largest deficits in history," said Democratic Rep. John Spratt of South Carolina, the chairman of the House of Representatives Budget Committee.

The U.S. Treasury later on Monday will unveil debt issuance plans for the next quarter, and it is expected to increase sales of 10-year notes and 30-year bonds to help compensate for slowing revenues.

Merrill Lynch & Co Inc last week estimated that a 2009 deficit topping $500 billion, combined with the government's normal financing operations, would require the Treasury to sell about $1 trillion in debt next year, a task they called "daunting."

(Additional reporting by Richard Cowan; Editing by Tom Hals)

you always bring such positive and uplifting thoughts to the threads

That's funny. I usually post jokes.

just looked at 3 pages of your posts....not a joke in the bunch

My apologies. I should have made myself more clear. The threads that I post are usually jokes. My posts are a variety of seriousness and joking. I guess that we don't have the same kind of humor. Thank you for your opinion.

This is funny!

In February, the administration forecast the deficit would hit $410 billion this year and drop to $407 billion in 2009. The new report said the budget deficit would fall to $178 billion in 2010, and start producing surpluses in 2012.

A Republican admission to defeat in this years elections.

That's the only thing that will bring down the deficit!!

If McConfused is elected we will all be wondering around the unemployment line confused looking for jobs within bicycle distance of our houses!
Muttering to ourselves, Its an illusion, its all in our mind!!

ahhhh...where is Madisonman when you need him???

You know that it is all in our minds. They even said so.

I'd like to say 'we won't get fooled again', but I know that as long as there are politicians that lie and distort the truth, we will get fooled. Again.

And history seems to keep repeating itself.

Yes, the US economy is in crisis, and all in the space of seven years. I don't think many Americans appreciate how badly the economy has been served in this period, or how they have been personally affected through the devaluation of the dollar, the massive debt service that has been placed on their shoulders, and the additional impacts that the 'slowdown' will have on jobs and prices.

And few have thought about the financial impact of the war against Iraq and Afghanistan and the radically increased personal surveillance programs on this economic catastrophe.

The numbers cited omit the costs to the Iraq war, and add a massive further amount of debt to the US economy.

It is difficult to see any solutions, other than wait for the Bush administration to be shut down and hope that we have a new President who actually understands economics and budgets, and who has the courage to shut down our overseas adventures and staunch the loss of money and US lives.

So another 7 months to go, and it is fingers crossed that we elect an intelligent and emotionally balanced president.

Oceans