US deficit doubles to a new record

THE US government notched up a record budget deficit of $374.2bn (£223.8bn) in 2003, more than double last year's figure and, many believe, a harbinger of worse to come.

The shortfall comes just three years after the country posted a record surplus, and few see signs of a reversal soon. 'We've reduced our tax base just when our spending is rising,' said Lyle Gramley, a former Federal Reserve Governor who is now an adviser at Schwab Capital Markets in Washington.

'Unless we're lucky, we'll have big deficits as far down the pike as the eye can see. My expectation is next year's deficit will be $100bn larger.' The deficit is a threat to President Bush's re-election hopes next year.

Many voters blame his $1.7 trillion, 10-year tax-cutting package, combined with the cost of the wars in Iraq and Afghanistan, for the shortfall.

Increased spending has been matched by plunging revenues. For the year to September, income fell 3.8% to $1.8 trillion. Spending at the same time rose 7.2%.

Democrats are having a field day with the numbers. 'We are headed for very difficult choices as a country, and this President is making the situation far worse by digging holes deeper,' Senator Kent Conrad, the senior Democrat on the Senate Budget Committee, said.