U.S. budget deficit seen topping $1 trillion in 2009

By Jeremy Pelofsky and David Lawder

WASHINGTON (Reuters) - Politicians want American consumers to resume spending to pull the economy out of its tailspin, and the U.S. government is leading by example with a potential $1 trillion deficit in 2009 -- even before a massive stimulus plan.

The Congressional Budget Office is set to release its projections on Wednesday for the fiscal 2009 budget deficit and experts believe it will not just set a new record beyond the $455 billion set in 2008, but could hit $1 trillion as the economic recession saps federal revenues.

While that figure likely includes some of the impact of a $700 billion bailout package for the financial industry and U.S. automakers, it does not include any of economic stimulus measures Congress hopes to pass, which could cost another $775 billion over two years.

President-elect Barack Obama is contemplating large tax cuts to the tune of about $300 billion and potentially as much if not more in infrastructure projects and other spending to try to jolt the economy out of recession.

North Dakota Sen. Kent Conrad, chairman of the Senate Budget Committee, said that a $1 trillion deficit was not just a possibility for 2009, but that an average of $1 trillion could be added to the national debt annually over the next decade.

"We're on an unsustainable course," he said in an interview with Reuters, adding that he had not yet seen the CBO figures.

"It's obvious we have to have a recovery package," the North Dakota Democrat noted, but Congress must also address longer-term issues, such as the costs of the Medicare health care program and Social Security retirement system.

TOUGH CHOICES AHEAD