WASHINGTON - THE US budget deficit hit a record of about US$438 billion (S$643 billion) in fiscal 2008, which ended Sept 30, the result of rising government spending for defence and other programmes and lower revenues because of the troubled economy, the Congressional Budget Office said on Tuesday.

The deficit for the year just ended that was announced by Congress' non-partisan budget analyst is US$276 billion more than the US$162 billion shortfall in fiscal 2007. The old deficit record of $413 billion came in fiscal 2004.

CBO said federal spending also rose for jobless benefits, Medicaid health care for the poor and the Federal Deposit Insurance Corp, which backs bank deposits.

Another contributor to the higher-than-expected government spending in fiscal 2008 related to a US$168 billion economic stimulus that Congress and President George W. Bush crafted early this year.

Government receipts for the just-ended year were about US$2.52 trillion, CBO said, down US$44 billion from the previous year.

'This administration will be responsible for the five worst federal budget deficits in American history,' said House Budget Committee Chairman John Spratt, a South Carolina Democrat.

In July, the Bush administration updated its economic forecast and predicted a US$389 billion budget deficit in fiscal 2008, significantly below the shortfall announced by the CBO.

A month ago, CBO predicted that the US budget outlook would worsen further, as it forecast a rising budget deficit for fiscal 2009, which began on Oct 1.

It is still unclear how this year's deficit might be impacted by the US$700 billion Wall Street rescue that was enacted last week.

CBO said the 2008 deficit was equal to 3.1 per cent of gross domestic product, up from 1.2 per cent the previous year and averaging 2.6 per cent during the period of 2002-2006.

CBO based its 2008 estimate on data from the Treasury Department, which is expected to report the actual deficit soon.

'The 11 per cent increase in defence spending was the largest since 2004, well above the seven percent average for the past three years,' CBO said. 'That boost was mostly due to higher spending for operations, maintenance and procurement,' CBO said.

The Pentagon is in the sixth year of combat in Iraq, which has cost the government more than a US$500 billion since 2003. When coupled with the war in Afghanistan, taxpayers have spent around US$850 billion on the two wars since late 2001.

Net interest on the government's snowballing debt also has become a major expenditure, with an estimated cost in fiscal 2008 of US$260 billion, CBO said. -- REUTERS