Federal budget deficit hits new high

By Erin Yerke

Oct 15, 2008 @ 1:45 pm (Updated 1:46 pm) EST

The federal budget deficit for fiscal year 2008 was reported today at a record $455 billion by the Department of the Treasury.

Coming in at more than double last year’s deficit, it was $65 billion over the estimate from the Treasury’s July mid-session review.

The deficit accounts for 3.2% of gross domestic product and surpasses the previous record deficit of $413 billion in 2004.

Stimulus tax rebates, the $700 billion financial services industry bailout, and increased spending in the Middle East are responsible for the spike, according to the Department of the Treasury.

And the worst may not be over: Further government action to stabilize markets will result in lower revenues and increased spending, causing a deficit of more than $500 billion in fiscal year 2009, some analysts say.

Some believe the deficit could run as high as $1 trillion, according to published reports.

“We are taking aggressive actions to stabilize our financial markets and strengthen our financial institutions so they can finance economic growth,” Treasury Secretary Henry Paulson said in a statement yesterday.