Federal Deficit Soars to a Record $1.417 Trillion

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.

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