Fiscal deficit reaches $374.22B, as officials warn it may be even higher in 2004 budget year.
October 20, 2003: 3:34 PM EDT

WASHINGTON (Reuters) - The U.S. government posted its largest budget gap in history in the just-ended 2003 fiscal year, $374.22 billion in red ink, the Treasury Department said Monday.

That broke the previous record of more than $290 billion posted in fiscal year 1992. As a percentage of the economy (GDP), the deficit totaled 3.5 percent, the largest since 1993. In its final monthly budget statement for fiscal 2003, the Treasury also said the government posted a $26.38 billion surplus in September, the final month in FY03.

Administration officials warned the deficit, which they blame on sluggish government revenues and rising expenses related to the war on terrorism, may be even larger in the current 2004 budget year, which began Oct. 1.

"Although the deficit is still projected to increase in 2004, and will likely exceed $500 billion even with a strengthening economy, we can put the deficit on a responsible downward path if we continue pro-growth economic policies and exercise responsible spending restraint," said Joshua Bolten, who heads the White House's Office of Management and Budget, in a statement issued with the budget figures.

Treasury Secretary John Snow said a rebounding economy should help the budget going forward. "As the economy grows, government revenues will go up, which will help keep the deficit under control," he said in a statement.
    
The September numbers, while well below the administration's official forecast for a $455 billion budget gap, were close to Wall Street and Congressional Budget Office projections. A Reuters survey of Wall Street analysts found an average forecast of a $25 billion September surplus. The CBO, Congress' nonpartisan budget watchdog agency, on Oct. 9 had projected last year's $374 billion figure precisely.

The record gap will likely fuel political bickering over the deficit. The previous record deficit was posted by President Bush's father, and was a major issue in his losing bid for reelection in 1992. In 2000, the government posted a record surplus of $236.92 billion.

Bolten said it was "an encouraging sign" that the budget picture had improved since the administration's $455 billion forecast made last summer.

"There's nothing here to cheer about," countered Tom Kahn, Democratic staff director for the House of Representatives Budget Committee. "It's still by far the biggest deficit in American history."