Mumbai: The next government in the US – led either by Democrat Barack Obama or Republican John McCain – will inherit a deficit of $482 billion amidst rising spending on war and economy support measures.

At $482 billion, the deficit would surpass the 2004 record deficit of $413 billion and far exceed the White House forecast of $407 billion. The deficit, which will hit $482 billion in the 2009 budget year, is expected to cross $500 billion next year, according to new White House estimates.

The figure will rise further after adding the billions of dollars in additional Iraq war funding and the total could be higher still if the economy fails to recover.

The sagging economy and the stimulus payments being made to 130 million households in an effort to stimulate consumer spending and keep the country from falling into a deep recession, will push up the deficit further, the White house said.

The deficit is sure to force the next incumbent abandon plans of tax cuts and instead push a tax-heavy deficit reduction plan. The numbers could go even higher if the economy performs worse than the White House predicts.

The budget office expects the economy to grow at 1.6 per cent this year and by 2.2 per cent next year. The administration also expects inflation to average 3.8 per cent this year, but ease to 2.3 per cent next year, against the earlier estimate of 3 per cent.

The deficit for 2008 and 2009, which represent about 3 per cent of the country's gross domestic product (GDP), would be smaller than the deficits of the 1980s and early 1990s.

In dollar terms, however, the new figures are are sure to put pressure on tax cuts enacted in 2001 and 2003, with Congress also feeling pressure to curb spending growth.

The deficit, announced by Jim Nussle, the White House budget director, does not reflect the full cost of war in Iraq and Afghanistan, the potential $50 billion cost of an economic stimulus package, or the possibility of steeper losses in tax revenues of a decline in individual and corporate incomes.
 
The new deficit numbers also do not account for any drains on the national treasury that might result from further declines in the housing market.

The deficit for the 2008 budget year ending 30 September will actually drop from an earlier projection of $410 billion to $389 billion, the report said.

The highlights are:

• Total federal revenues to decline slightly from 2007 to 2008.
  
• Corporate income tax collections in 2008 and in each of the next three years will be lower than the amount collected in 2007.

Federal spending will increase nearly 8 per cent this year and then 6.5 per cent in 2009.