U.S. Budget Gap Hits Record $1.4 Trillion

WASHINGTON (Reuters) - The U.S. budget deficit hit a record $1.4 trillion in the just-ended fiscal year, the government said on Friday, as the deep recession and a series of bank rescues cut a gaping hole in public finances.

The tally was $162 billion smaller than the White House had forecast in August, but it still amounted to 10 percent of total U.S. economic output, the most for any budget shortfall since World War Two.

President Barack Obama has pledged to rein in high budget deficits by addressing long-term challenges like health care and energy costs in a fiscally responsible way.

But his critics argue that the healthcare reform efforts under consideration would add to the budget strain, and they pointed to the large deficit as cause for concern.

"Democrats in Washington are now calling for adding yet another quarter-trillion dollars to the deficit on health care spending alone," Senate Republican leader Mitch McConnell said. "Congress simply can't continue acting like a teenager on a spending spree with their parent's credit card with no regard to who pays the bill."

In August, the White House had forecast a $1.58 trillion deficit. The figure came in smaller than expected largely because of lower-than-expected spending out of the government's $700 billion financial rescue fund.

Still, it was more than three times as large as the $459 billion deficit racked up in the prior fiscal year.

For September alone, the deficit came in at $46.6 -- a record for the month that marked the first time ever the United States has seen 12 consecutive months of budgetary red ink. The government normally runs a surplus in September.

TREASURY OUTSPENDS DEFENSE

Rescuing the economy and some of the country's biggest banks from the worst recession since the Great Depression took a toll on U.S. finances, and the White House has forecast deficits of more than $1 trillion through fiscal 2011.