Page last updated at 16:08 GMT, Tuesday, 26 January 2010

US deficit 'set to hit $1.35tn'

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The US deficit in 2008 stood at $459bn

The US budget deficit is expected to reach $1.35 trillion (£837bn) in 2010, according to US Congress estimates.

In 2009, the US deficit hit a record $1.4tn - equal to 9.9% of gross domestic product (GDP) - and the highest since the end of World War II.

President Obama will make his first State of the Union address on Wednesday and will submit his budget plan on 1 February.

He is expected to announce a three-year partial spending freeze.

The savings - expected to be about $15bn off next year's budget and to amount to $250bn during the next 10 years - are aimed at reducing the country's massive deficit.

Shrinking deficit

The Congressional Budget Office (CBO) said the large deficits in 2009 and 2010 reflected:

• an imbalance between revenues and spending that predated the recession

• sharply lower revenues and higher spending in the recession

• the costs of various federal policies implemented in response to the global downturn.

However, the CBO's forecast was a downwards revision to its previous estimate of $1.38tn.

It expects deficits to shrink over the coming years as economic recovery gets underway, with the deficit falling to $475bn in 2014.

But it says the deficit will then start to rise again, reaching $687bn in 2020.

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