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Federal Shortfall To Double This Year

Democrats called that assertion preposterous, noting that much of the increase was the result of measures that received strong Republican support: one to return billions of dollars to taxpayers as part of the economic stimulus package and another to increase war funding. Bush signed legislation this summer to pay for the wars in Iraq and Afghanistan through the rest of his presidency, bringing total Iraq spending to more than $650 billion and the total for Afghanistan to nearly $200 billion.

"So they're fully responsible for the increase in the deficit," said Senate Budget Committee Chairman Kent Conrad (D-N.D.). "All of this happened on their watch, under their president."

In January, congressional budget analysts had estimated the deficit would be only $219 billion by year's end. By July, however, the White House was predicting that the number would spike to $389 billion because of new spending. Yesterday, the congressional analysts upped it even further, saying the increase over 2007 had been driven equally by two factors.

The weak economy has clobbered corporate profits, halting the growth of tax collections. And spending has jumped sharply, in part because of tax rebates, as well as a hike in expenditures to cover unemployment insurance and deposits of insolvent financial institutions.

This year's deficit will rival the record of $413 billion set in 2004. With the economy expected to remain sluggish for at least the next several months, the Congressional Budget Office projects that next year's deficit will rise to $438 billion. But Orszag said that number could easily climb to $540 billion if Congress acts in the coming months, as expected, to restrain the growth of the alternative minimum tax and to extend a variety of expiring business tax breaks.

Despite the gloomy budget outlook, Democrats said they would press ahead with plans for a second stimulus package of about $50 billion, a proposal opposed by Republicans but supported by Obama. "We would probably be in a worse situation if we didn't do a second stimulus," said Sen. Charles E. Schumer (D-N.Y.), who heads the Joint Economic Committee.

Economic advisers to the presidential campaigns said the big deficits would do little to change their plans for cutting taxes or, in Obama's case, for increasing spending on priorities such as health care and education. "A weak economy is not the time to dramatically reduce your budget deficit," said Jason Furman, an adviser to Obama, who wants to extend some of Bush's tax cuts. "The top priority is creating jobs and getting the economy going again."

Douglas Holtz-Eakin, an economic adviser for McCain, acknowledged that the deeper budget hole will make it much harder for McCain to keep his promise to balance the budget while extending all of Bush's tax cuts. "But that doesn't mean the first and best thing to do is raise taxes," Holtz-Eakin said. "The best thing to do is get the economy going again and create jobs."


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