WASHINGTON - THE White House on Monday pushed up its forecast for the US budget deficit for this year by US$89 billion (S$129.8 billion), reflecting the recession, a raft of new unemployment claims and corporate bailouts.

A fresh estimate of the deficit showed it coming in at US$1.84 trillion - representing a massive 12.9 per cent of gross domestic product - in the current 2009 fiscal year that ends on Sept 30. A prior White House forecast released in February projected a deficit of US$1.75 trillion, or 12.3 per cent of GDP.

CLOSING THE GAP The new White House figures bring the deficit estimates closer in line with the non-partisan Congressional Budget Office, which has forecast a US$1.85 trillion deficit this year and US$1.38 trillion in fiscal 2010. To allay worries about the deficit and fend off Republican attempts to paint him as a big spender, Mr Obama over the past week has rolled out a series of announcements aimed at showing he is working to stem the red ink. ... more

The report may add to the political challenges facing President Barack Obama as he seeks to push through a new healthcare plan and other big domestic initiatives.

A White House official said the gloomier deficit picture reflected weaker tax receipts as the economy declined and higher costs for social safety-net programmes such as unemployment insurance. Spending on the government rescues for the financial and automobile industries was also a factor in the higher deficit, said the official, who spoke to reporters on condition of anonymity.

While the Democratic-led Congress has given its approval to the broad outline of Mr Obama's proposed budget for the 2010 fiscal year that includes initiatives on healthcare, education and other items, some moderate Democrats and a number of Republicans have expressed wariness about the deficit outlook.

Republicans contend that Mr Obama's agenda would sharply increase the size of government and add to a mountain of debt but Democrat Obama counters that the enormous deficits are a legacy of President George W. Bush, a Republican.

The higher deficits 'are driven in large part by the economic crisis inherited by this administration', White House budget director Peter Orszag wrote in his blog on Monday.

The report from the White House Office of Management and Budget also revised the deficit higher for the 2010 fiscal year, forecasting it at US$1.26 trillion, or 8.5 per cent of GDP, and up US$87 billion from the US$1.17 trillion projection given in February.

After taking office in January, Mr Obama released a bare-bones version of his budget in February that offered a spending plan for 2010 carrying a price tag of US$3.55 trillion. The White House revised up the size of the spending plan to US$3.59 trillion.

The US economy shrank at a surprisingly steep 6.1 per cent rate in the first three months of this year. -- REUTERS