WASHINGTON, Oct 17 — The Obama administration said yesterday the deficit for the fiscal year just ended was US$1.4 trillion (RM4.9 trillion), the largest relative to the size of the economy since 1945, underscoring the challenge to shrink the fiscal gap even as the White House and Congress consider further steps to stimulate a slow recovery.
The final tally for fiscal 2009, which ended Sept. 30, was nearly US$1 trillion greater than the US$459 billion deficit for fiscal 2008. This year’s deficit translates to nearly 10 per cent of the size of the economy, up from 3.2 per cent of gross domestic product for last year’s deficit, according to a joint statement from the Treasury Department and the Office of Management and Budget.
Economists generally agree that annual deficits should not exceed 3 per cent of the gross domestic product, and that is the level that President Obama had vowed to reach by fiscal 2013, at the end of his first term. At 10 per cent, the 2009 deficit is the highest since the end of World War II, when it was 21.5 per cent.
The administration’s deficit calculation tracks an estimate last week from the Congressional Budget Office anticipating the figures from Treasury and the Office of Management and Budget. At US$1.4 trillion, the actual deficit was slightly lower than each had expected in August, when the White House budget office projected a US$1.8 trillion deficit and the Congressional office US$1.6 trillion.
“This year’s deficit is lower than we had projected earlier this year, in part because we are managing to repair the financial system at a lower cost to taxpayers,” the Treasury secretary, Timothy F. Geithner, said in a joint statement with Peter R. Orszag, the budget director. “But future deficits are too high, and the president is committed to working with Congress to bring them down to a sustainable level as the economy recovers.”
Orszag said that for the president’s next budget, which he will propose early next year, “we are considering proposals to put our country back on firm fiscal footing.”
At the same time, the administration and Congress are in early discussions about extending various spending and tax cut measures that were part of last winter’s US$787 billion stimulus plan but expire by the end of the year. The White House is considering additional measures as well, including boosting programmes to lend money to small businesses. — NYT
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