US deficit tops 1 trillion dollars

36 minutes ago

 

The US federal deficit topped one trillion US dollars for the first time
ever and could grow to nearly two trillion by this autumn, intensifying
fears about higher interest rates, inflation and the strength of the dollar.

The deficit has been widened by the huge sum the government has spent to
ease the recession, combined with a sharp decline in tax revenues.

The cost of wars in Iraq and Afghanistan also is a major factor.

The soaring deficit is making Chinese and other foreign buyers of US debt
nervous, which could make them reluctant lenders down the road. It could
also force the Treasury Department to pay higher interest rates to make US
debt attractive longer-term.

"These are mind-boggling numbers," said Sung Won Sohn, an economist at the
Smith School of Business at California State University. "Our foreign
investors from China and elsewhere are starting to have concerns about not
only the value of the dollar but how safe their investments will be in the
long run."

The Treasury Department said that the deficit in June totalled 94.3 billion
US dollars, pushing the total since the budget year started in October to
1.09 trillion US dollars. The administration forecasts that the deficit for
the entire year will hit 1.84 trillion US dollars in October.

Government spending is on the rise to address the worst financial crisis
since the Great Depression and an unemployment rate that has climbed to
9.5%.

Congress already approved a 700 billion US dollar financial bailout for
banks, carmakers and other sectors, and a 787 billion US dollar economic
stimulus package to try to jump-start a recovery.

(Copyright C 2009 The Press Association. All rights reserved. )

 

 

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