Tax shortfall and bailouts see record budget deficit in US

The US budget deficit shot up to a record $1.1 trillion (£682.6 billion) during the past nine months, thanks to lower tax receipts and taxpayer-funded bailouts of the financial system, a Congressional report estimated today.

Tax receipts and other revenues during June were an estimated $46 billion - down 18% from the same period in 2008 and the 14th month running in which receipts were lower than the previous year.

Taking the first nine months of the fiscal year (which in the US begins on 1 October), the Congressional Budget Office (CBO) said corporate tax revenues plunged by $133 billion, or 56%, largely due to continued weakness in company profits.

The CBO reckons the biggest economy in the world will notch up a peak budget deficit of $1.8 trillion this fiscal year - far in excess of any previous records. In 2010 it estimates that will improve, but only to around $1.4 trillion.

As well as the fall in corporate profits, the deficit has spiralled due to the $787 billion economic stimulus package and $700 billion financial bailout programme for banks and carmakers.