UPDATE 2-US budget gap soars in first half of fiscal 2009

Fri Apr 10, 2009 9:04pm BST

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(Adds details on deficit estimates, spending plans)

By David Lawder

WASHINGTON, April 10 (Reuters) - The United States posted a record $956.8 billion budget deficit for the first half of fiscal 2009, more than triple the year-ago shortfall, as spending on financial and economic rescue programs ramped up, the Treasury Department said on Friday.

For March, the government recorded a deficit of $192.27 billion, a record for the month and nearly four times the year-ago gap of $48.21 billion.

March budget outlays ballooned to $321.23 billion, including $46 billion spent to inject capital into government-controlled housing finance companies Fannie Mae FNM.N and Freddie Mac FRE.N and $10.6 billion for federally subsidized unemployment benefits. The total outlays compared with $227.02 billion for March 2008.

The March outlays would have been even larger, but the federal government shifted about $15 billion of benefit payments into February because March 1 was a Sunday.

March receipts fell sharply as a rapidly deteriorating economy dried up tax revenue from individuals and businesses. Receipts for the month fell 28 percent to $128.96 billion from $178.82 billion a year earlier.

In addition to the capital support for Fannie and Freddie, the government purchased $17.38 billion of mortgage-backed securities from government-sponsored enterprises, marking a total of $119.2 billion for the first half of fiscal 2009, which started on October 1.

The nearly $1 trillion deficit in the first half of the fiscal year is consistent with some private forecasts that the fiscal 2009 shortfall will be in the $1.6 trillion to $2 trillion range, dwarfing the 2008 record of $454.8 billion.

The government is now increasing spending on infrastructure and tax cuts under the Obama administration's $787 billion economic stimulus plan. It is also spending more on housing relief that uses financial bailout funds.

It has not yet determined whether to ask Congress for additional funds to strengthen the financial sector, although Obama's 2010 budget plan contains a "placeholder" that envisions up to $750 billion of asset purchases from financial institutions.

The government has now run deficits in each of the past six months -- the first time that has occurred since the October 2003 through March 2004 period, when tax cuts reduced revenue and Iraq war spending increased. (Editing by Neil Stempleman and Steve Orlofsky)

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