US budget deficit reaches record $1.42 trillion

The US federal budget deficit has tripled to a record high of $1.42 trillion in the past year amid the worst economic crisis in decades, according to government data released on Friday.

The figure for the 2009 fiscal year, which ended Sep 30, represents about 10 per cent of US gross domestic product (GDP), the highest percentage since 1945. That compares to a deficit of 3.2 per cent of GDP in 2008.

Yet the deficit was lower than previous forecasts. Treasury Secretary Timothy Geithner attributed the drop to a cheaper bill for financial bail-outs.

"We are managing to repair the financial system at a lower cost to taxpayers," Geithner said. The government predicted a $1.58-trillion deficit in August and a $1.8-trillion deficit in May.

President Barack Obama's administration has come under criticism from Republican opponents, fiscally conservative Democrats and some foreign governments for paying too little attention to the skyrocketing deficit. The White House says public spending is needed until there is a broader economic recovery.

"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," Geithner said.

The government said revenue plummeted 16.6 per cent in the 2009 fiscal year as the economic crisis depressed incomes and company profits, resulting in lower tax intakes. Unemployment has surged to 9.8 per cent, the highest in 28 years.

Public spending increased by 18.2 per cent over the year, mainly due to a $787-billion economic stimulus package approved by Congress in February.

Back in November 2008, Congress set aside $700 billion to bail out banks teetering on the brink of collapse. But many have since paid back the loans and the financial rescue ended up costing $153.9 billion in 2009. More costs are expected in 2010.

The government's figures were roughly in line with deficit projections released earlier this month by the Congressional Budget Office, which keeps track of spending for the legislature.