The US is set to rack up an even bigger budget deficit than originally thought over the next decade, officials say.
The US government spends more than it earns
The Congressional Budget Office (CBO) said the deficit would grow to a cumulative $2.3 trillion (£1.2 trillion) between 2005 and 2014.
The CBO had previously forecast a cumulative budget gap of $2.1 trillion over the decade.
The agency added that the deficit for the year to 30 September 2004 would set a new record of $422bn.
Although a new record, the figure for the current financial year is slightly lower than the CBO's previous forecast of $477bn.
It is also smaller as a proportion of the overall economy than the budget shortfalls recorded during the late 1980s and early 1990s.
Tim Adams, the policy director of President Bush's electoral campaign, said the downgrade in the 2004 deficit forecast showed that the government's economic policies were working.
"The $56bn decrease in the deficit projection today is a sign of the economic growth that is a result of President Bush's leadership on tax relief," he said.
But Democrat presidential candidate John Kerry criticised the government's failure to rein in "out of control" spending.
"Only George W Bush could celebrate over a record budget deficit of $422bn," he said in a statement.
The CBO said the upward revision to the 10-year budget gap partly reflected higher anticipated defence spending.
The US public finances have swung from hefty surpluses to large deficits since President Bush took office.
The White House blames the 2001 recession and the cost of the war on terror.
But President Bush's critics argue that the deficits have also been swollen by a round of tax cuts which benefit only the rich.
They argue that the government's deteriorating finances threaten spending on social welfare and healthcare for the elderly.
Analysts say the budget deficits will grow by more than forecast over the next 10 years if President Bush wins a second term and extends his tax cuts, as he has pledged to do.