US budget deficit seen at $400bn

Military costs have contributed to the deficit increase

The US budget deficit is expected to reach $400bn (£205bn) this year, according to estimates from the Congressional Budget Office.

The figure for the twelve months to September 30 is larger than a previous estimate by the White House of $389bn.

Factors behind the deficit increase include the cost of the war in Iraq and problems in the housing market that prompted a wider economic slowdown.

The largest US deficit to date was $412.7bn, reached in 2004.

The largest factor contributing to an increase in outlays "was the $15bn disbursed in July this year by the Federal Deposit Insurance Corporation to cover deposits at failed financial institutions," said the CBO.

Defence spending also saw "strong growth" in the ten months to July.

The White House recently estimated that the deficit in 2009 would be $445bn.

Another factor contributing to the wider deficit is an increase in federal spending in a bid to boost the economy.

The government set out plans for an economic stimulus package at the start of the year, involving about $145bn in tax cuts to encourage spending.