Page last updated at 19:20 GMT, Monday, 28 July 2008 20:20 UK

Record deficit for next president

John McCain and Barack Obama
The next president may have his hands tied by the size of the deficit

The next US president is expected to face a record federal budget deficit of almost half a trillion dollars.

The White House has lifted its deficit forecast for 2009 to $482bn (242bn) up from $407bn.

The budget deficit measures how much more the government is spending than it is raising through taxes.

The slowing economy is reducing the tax take and the government has launched a stimulus plan by making payments to 130 million households to boost spending.

The forecast figure excludes about $80bn of war costs.

The budget deficit is measured from the beginning of October to the end of September.

It is possible that the deficit for 2008 will also break the record of $413bn, which was set in 2004.

A $482bn deficit would represent about 3% of the total output of the US economy, which is well below some of the deficits seen in the 1980s and 1990s in percentage terms.

Nonetheless, whoever turns out to be the next US president may be reluctant to enact any further tax cuts or increases in spending that would raise the deficit.

The deficit figure also is flattered by including the surpluses that are currently being accumulated by the social security trust fund, but that will soon turn into deficits in the next decade.

And it takes no account of the potential costs of a full-scale Federal bail-out of the mortgage giants Fannie Mae and Freddie Mac, who have been given a Federal guarantee in the housing bill that has just passed Congress.

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