MercoPress. South Atlantic News Agency

US federal deficit hits all time high record of 1.42 trillion US dollars, 10% of GDP

The United States federal deficit is at an all-time high, 1.42 trillion US dollars for fiscal year 2009, which ended September 30. However it was lower than forecasted In August, 1.58 trillion and much less than in May 1.84 trillion US dollars.

“This year's budget 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,” Treasury Secretary Timothy Geithner said in a statement. But he cautioned, that “future deficits are too high.”

The figures, released jointly by the Treasury Department and the White House Office of Management and Budget basically coincide with those from the Congressional Budget Office announced last week, “about 1.4 trillion US dollars”.

This represents approximately 10% of the United States GDP, the highest percentage since 1945.

A positive analysis of the impressive record breaking figure must contemplate that both the Bush and Obama administrations generously pumped liquidity into the financial system to keep the economy afloat while revenue dropped by 419 billion USD, nearly 17%, since the end of fiscal year 2008.

The decline in US government receipts was largely the result of the recession's drag on incomes and corporate profits, according to Treasury and OMB. Government spending or outlays grew by 543 billion USD, or 18.2%, over 2008 because of various efforts to stabilize the economy. Interest on the public debt was 383.4 billion USD, about 11 billion less than budget analysts estimated in August, but still an impressive figure.

According to the joint statement from Treasury and OMB, “The fiscal year 2009 deficit was largely the product of the spending and tax policies inherited from the previous administration, exacerbated by a severe recession and financial crisis that were underway as the current administration took office.”

According to the Congressional Budget Office, total US public debt could mount to 68% of GDP in 2019.

In related positive news US industrial production increased more than expected in September, growing for the third straight month.

Output in factories, mines and other industrial facilities expanded 0.7% in September, said the data from the Federal Reserve. This was higher than the 0.2% rise expected by analysts and followed an upwardly revised 1.2% in August.

The US industrial sector is recovering more quickly than the retail sector.

But while industrial output continues to grow, recent official figures from the Commerce Department showed that September's US retail sales registered the biggest monthly fall so far this year. The 1.5% decline in retail sales last month was driven by plummeting car sales following the end of the government's scrappage plan

In spite of the shocking numbers, lower than forecasted