UPDATE: FY09 US Budget Deficit Estimated At $1.4 Trillion - CBO

The U.S. budget deficit for fiscal year 2009 was $1.4 trillion, the highest deficit as a share of the nation's economy in over a half-century, according to an estimate from the nonpartisan Congressional Budget Office (CBO).

The CBO in its monthly budget report states that the fiscal 2009 deficit was estimated to equal 9.9% of gross domestic product in the U.S. - the largest deficit relative to the nation's gross domestic product since 1945.

The deficit was estimated for the fiscal year ending on Sept. 30. The Treasury Department will release official figures on the fiscal 2009 deficit later this month.

House Budget Chairman John Spratt, D-S.C., said the new figures stem largely from efforts to contain damage from the nation's economic crisis, but that a change in course would soon be necessary.

"As the economy stabilizes and starts to recover, we will have to turn our focus back to deficit reduction," Spratt said.

The fiscal year 2009 deficit dwarfs the $459 billion deficit recorded for the U.S. in the previous fiscal year.

The federal government spent an extraordinarily large amount of money in fiscal year 2009, with the government's outlays increasing by $532 billion over the previous year. The fiscal 2009 spending is equal to 25% of the nation's gross domestic product, which the CBO states is "the highest level in over 50 years."

The increased spending was due in large part to the Treasury Department's Troubled Asset Relief Program, the $787 billion economic stimulus and the rescue of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).

The federal government also saw revenues drop to historic lows in fiscal 2009, falling by $419 billion, or 16.6%, from the previous year. The CBO cited falling revenues specifically from income tax withholding and corporate tax receipts, both of which were affected by the weakening economy.

For the month of September alone, the U.S. ran an estimated budget deficit of $31 billion, in contrast to a $42 billion surplus the previous year.

- By Patrick Yoest, Dow Jones Newswires; 202-862-3554; [e-mail]