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Budget Deficit to Hit $407 Billion in 2008

Increased spending and a 'halt' in the growth of tax revenue sends the national deficit soaring, the Congressional Budget Office reports.
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The Congressional Budget Office estimates the budget deficit for 2008 will be $407 billion. In an

updated report

released Tuesday, the CBO says the figure amounts to 2.9% of the gross domestic profit, marking an increase from 1.2% of GDP in 2007.

The CBO report explains in simple terms the reason for the higher deficit:

"The significant expansion in the deficit is the result of a substantial increase in spending and a halt in the growth of tax revenue. In 2008, CBO estimates, federal spending will be 8.3 percent higher than in 2007; at the same time, total revenues will probably be less than they were in 2007."

One unexpected increase hit came over the weekend -- the

federal seizure of mortgage giants

Fannie Mae



Freddie Mac



The CBO noted a variety of factors affecting the economy: depressed housing market, fragile financial markets and high commodity prices. Whether or not the U.S. has technically entered a recession, the CBO stated that higher unemployment and low growth rates parallel previous periods of mild recession. Furthermore, the CBO predicted several months of future slow growth.

The CBO described the long-term budget outlook as "unsustainable." The CBO stated the single largest factor on future deficit numbers would be the rising cost of health care for seniors. Medicare and Medicaid could reach 6% of GDP by the year 2018, rising from its current 4.6%.