"The FY2009 deficit was largely the product of the spending and tax policies inherited from the previous administration, exacerbated by a severe recession and financial crisis that were underway as the current administration took office," the Treasury Department and Office of Management and Budget said in a statement.
The Obama administration stated that their economic rescue and recovery efforts accounted for only 24 percent of the total deficit.
This year's record deficit stems from increased government spending to beat back the recession and the financial crisis, as well as decreased revenue from tax receipts. For the fiscal year that ended Sept. 30, the government racked up overall receipts of $2.1 trillion, but outlays totaled $3.5 trillion. Federal borrowing from the public net of financial assets, the department said, rose by $1.417 trillion to $6.71 trillion, 47 percent of GDP.
The year-end deficit came in $162 billion under the Obama administration's most recent projection of $1.58 trillion. Originally, the administration had projected in February a deficit of $1.84 trillion, but reduced its projection in August to $1.58 trillion. The final deficit numbers released today were even lower than that, at $1.417 trillion, due to outlays $132 billion lower than anticipated in August because fewer funds from the Troubled Asset Relief Program were spent.
"This year's deficit is lower than we had projected earlier this year, in part because we are managing to repair the financial system at a lower cost to taxpayers," Treasury Secretary Tim Geithner said in a statement. "But future deficits are too high, and the President is committed to working with Congress to bring them down to a sustainable level as the economy recovers."
The Obama administration earlier this year projected a $1.5 trillion budget deficit for fiscal year 2010 and a $1.1 trillion deficit for 2011 before the streak of trillion-dollar shortfalls comes to an end in 2012. Between 2010 and 2019, the administration predicted a total budget deficit of $9.1 trillion.
In a statement released today with the deficit numbers, OMB Director Peter Orszag said, "It was critical that we acted to bring the economy back from the brink earlier this year. As we move from rescue to recovery, the president recognizes that we need to put the nation back on a fiscally sustainable path. As part of the FY 2011 budget policy process, we are considering proposals to put our country back on firm fiscal footing."
The Obama administration has blamed over half of the projected deficits over the next decade on the Bush White House for not following the pay-as-you-go principle. The cumulative 10-year deficit, the Obama administration has said, would be $5 trillion lower if their predecessors had followed these rules. In 2008, the budget deficit was $459 billion.
Going forward, Geithner has said that the government fiscal objectives will differ from the Bush administration's policy.
"We are going to run fiscal policy in this country consistent with that basic objective of going back to living within our means," he said at the Newseum in Washington on October 1.
The rising deficit has prompted concerns that China, the largest foreign holder of US government debt, might reduce its holdings, but Geithner stated last month that he is "very confident" that this will not happen. Americans, Geithner has observed, are already saving more – and spending less, a fact that the rest of the world "is going to have to come to terms with," he told German weekly magazine Die Zeit earlier this month. Thus far, fears about a Chinese sell-off have not been realized. During the month of August, the Chinese only reduced their holdings of US government debt by $3 billion from $800 billion down to $797 billion.
Asked at a September town hall meeting conducted by CNBC if bringing down the deficit could mean tax hikes, Geithner replied, "We're going to do it in ways that do not add to the burden on middle-class Americans."
The final deficit for the year is equal to 10 percent of the nation's GDP, the highest shortfall relative to GDP since 1945.