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Last Updated: Tuesday, 26 August, 2003, 14:44 GMT 15:44 UK
Iraq war adds to US budget trouble
The US will be in the red by almost half a trillion dollars next year thanks largely to the spiralling cost of involvement in Iraq, a non-partisan government report says.

In its twice-yearly Budget Outlook, the Congressional Budget Office says the US will run up a deficit of $480bn in 2004, following a $401bn deficit this year.

The figures - a new record in dollar terms - are markedly worse than the CBO predicted in March this year, when the 2003 number was seen at $246bn.

They suggest a near-$1.4 trillion deficit in the 10 years to 2013 where they had previously foreseen a surplus of $891bn.

The CBO figures assume that the White House's massive programme of tax cuts will be temporary, as promised.

If they are made permanent, something many Republicans have sworn to achieve, the deficit could swell to almost $3 trillion over the 10-year period.

'Jobless recovery'

The White House insists that its massive tax cuts will underpin a recovery, and that as individuals and businesses fare better tax revenues - and the government's fiscal position - will improve.

It has itself predicted a $455bn deficit for this year - the lower CBO figure is based on predictions of slower-than-expected spending of money earmarked for Iraq - and $475bn in 2004.

But Democrat opponents of President George W Bush were quick to pin much of the blame for the deep hole in the budget that the CBO is predicting on the tax cuts themselves - as well as on the war in Iraq.

And they are likely to focus on another potential stumbling block for the Bush administration: the CBO's prediction that unemployment is likely to stay high right through to the next Presidential election in November 2004.

Almost 3 million jobs have been lost in the US in the past three years.

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