US budget deficit trebles to $1.42 trn on eco revival efforts | business | Hindustan Times
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US budget deficit trebles to $1.42 trn on eco revival efforts

Fighting the worst financial turmoil in decades, the US saw its federal budget deficit more than treble to $1.42 trillion for the financial year ended on September 30.

business Updated: Oct 18, 2009 13:23 IST

Fighting the worst financial turmoil in decades, the US saw its federal budget deficit more than treble to $1.42 trillion for the financial year ended September 30.

The deficit stood at just $455 billion in the same period a year ago, according to the official figures.

However, the deficit of $ 1.42 trillion, among the highest since 1945, is much less than the previous estimate of USD 1.58 trillion made in August.

In May, advanced projections suggested that deficit would touch USD 1.84 trillion for financial year ended September 30.

US Treasury Secretary Timothy Geithner and White House Office of Management and Budget (OMB) Director Peter R Orszag in a joint statement on Friday said the deficit ballooned to $1.42 trillion, primarily on the back of the Federal government's economic recovery efforts.

For these initiatives, the budgetary outlay rose by $543 billion, compared to the allocation in fiscal year 2008.

Battered by the worst economic recession since the Great Depression, the US has come up with unprecedented steps, including mammoth USD 787-billion stimulus packages, purchasing stakes in banks and revival plans for auto makers.

"This year's deficit is lower than we had projected earlier this year, in part because we are managing to repair the financial system at a lower cost to taxpayers," US Treasury Secretary Timothy Geithner said in a statement on Friday.

The federal deficit dropped by USD 162 billion from a projected USD 1,580 billion in the August Mid-Session Review (MSR) to the final figure of USD 1,417 billion.

According to the statement, the staggering deficit was "largely the product of the spending and tax policies inherited from the previous administration, exacerbated by a severe recession and financial crisis..."

"Overall, government receipts in FY 2009 were USD 419 billion lower than in FY 2008 — a reduction of 16.6 per cent... Receipts fell from 17.5 per cent of GDP in FY 2008 to 14.8 per cent of GDP in FY 2009," it noted.

The Troubled Asset Relief Program initiatives of the US government to aid financial institutions and stabilise credit markets and the Treasury's Preferred Stock Purchase Agreement with Fannie Mae and Freddie Mac, among other efforts, resulted in increased outlays.

Mired in recession since December 2007, the US economy's pace of contraction has slowed down in recent months and the GDP shrank 0.7 per cent in the second quarter, much less than expected.