U.S. Deficit Projection Trimmed for 2009

From Wsj.com

The Obama administration next week will project a federal budget deficit for fiscal 2009 of about $1.58 trillion, slightly less than previously predicted, a senior administration official said.

The change reflects improvements in the financial industry since the beginning of the year that have somewhat lessened the government's expected bailout burden. But the federal budget deficit still would exceed any since World War II as a percentage of the economy, the measure economists prefer.

The large deficit and the grim longer-term fiscal outlook also will continue to play a big role in the debate over domestic priorities, such as health-care overhaul.

The White House budget office and Congress will update their fiscal projections Tuesday. The administration earlier this year predicted the deficit for fiscal 2009 -- which ends Sept. 30 -- would be about $1.84 trillion.

The improvement since then reflects the lowered cost of the financial-sector bailout, officials said. In particular, the Obama administration is dropping the $250 billion cost of additional aid for the financial industry.

The administration's forecast also is benefiting from a somewhat improved outlook for expenditures related to bank failures.

A Republican aide complained late Wednesday that the administration's latest forecast actually masks a slight deterioration in the fiscal situation this year, because of lower-than-expected revenue collections.