WASHINGTON
The Obama administration said yesterday that the federal budget deficit for the fiscal year that just ended was $1.4 trillion, nearly a trillion dollars greater than the year before and the largest shortfall relative to the size of the economy since 1945.
The number, while lower than forecast a few months ago, underscored the challenges ahead in shrinking the deficit even as the White House and Congress are considering more steps to stimulate an economy that is making a slow recovery from the deep recession. The political hurdles to finding a solution were evident yesterday as each political party immediately blamed the other for the growth of the deficit.
The shortfall for the fiscal year 2009, which ended Sept. 30, translates to 10 percent of the size of the economy, according to a joint statement from Treasury Secretary Timothy Geithner, and the director of the Office of Management and Budget, Peter Orszag. For the 2008 fiscal year, the deficit of $459 billion was 3.2 percent of the economy, as measured by the gross domestic product.
Economists generally agree that annual deficits should not exceed 3 percent of the GDP, and that is the level that President Obama had vowed to reach by 2013. But subsequent spending and tax cuts to stimulate the economy, and lower-than-expected revenues as the recession deepened before bottoming out, combined to push the administration's deficit forecast to 4.6 percent of GDP for the fiscal year 2013.
At 10 percent of the gross domestic product, the 2009 deficit is the highest since the end of World War II, when it was 21.5 percent.
Investors who are essential to financing the debt, including China, are eager for signs that the government eventually will regain control over its budgets. Some economists are worried about the stability of the dollar.
And polls show that Americans are increasingly worried as well, raising concerns about Obama's ambitious domestic agenda, including his signature health-care overhaul, that Republicans are aggressively stoking. At the same time, many Americans are demanding further help, confronting forecasts that job losses will not peak until mid-2010.
Orszag alluded to the administration's fiscal quandary in the statement yesterday.
"As we move from rescue to recovery, the president recognizes that we need to put the nation back on a fiscally sustainable path," he said. Orszag said that proposals to help do that would be part of Obama's next budget early next year, for fiscal 2011.
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