US posts record budget gap

Mr Bush wants to win over economic critics

The US budget deficit for the most recent financial year has hit a new record, according to official figures.

The Treasury Department on Monday said the budget gap - the amount by which spending exceeds revenues - grew to $374.2bn (£224bn) in the year to 30 September.

The figure was double the previous year's deficit, and easily outstripped the previous record of $290bn, set in 1992.

It was in line with independent economists' expectations, but fell short of the US government's own forecast of $455bn.

The government blamed the imbalance on sluggish economic growth, and the cost of the war in Iraq.

Future growth

Officials warned that the deficit would continue to rise in the months ahead, breaking the $500bn barrier in the current financial year.

However, they added that a combination of economic growth and spending restraint would start to balance the books the following year.

"As the economy grows, government revenues will grow, which will keep the deficit under control," said Treasury Secretary John Snow.

According to current government forecasts, the budget gap is set to halve over the next five years.

Government officials have also tried to play down the significance of the latest spending imbalance, pointing out that it is smaller as a proportion of total US economic output than some of the deficits recorded during the 1980s.

Election issue

But the scale of the budget gap could provide ammunition to critics of President George W. Bush's economic policies in the run-up to next year's presidential elections.

Mr Bush's political opponents are likely to single out a round of tax cuts - widely criticised as favouring the rich - he pushed through earlier this year as one reason for the imbalance.

They may also attempt to draw parallels with the last Republican administration, led by President Bush's father, which set the previous record deficit.

George Bush senior was voted out after a single term in office, despite having waged a successful military campaign in Iraq, as voters chose instead to focus on his handling of the economy.