US heading for £200bn shortfall

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The Congressional Budget Office estimates are higher than the White House projections of $389 billion.

Analysts were already predicting the new President would be confronted with a shortfall of more than $500 billion when iraq war spending is added in. in its "mid-session review" on 28 July, the White House predicted that year's budget deficit could hit $482 billion, not counting the full cost of the iraq war and other possible government expenditures.

President Bush presided over steadily rising deficits from 2002 to 2004 but they had been retreating since 2005. Last year's deficit was $162 billion.

Bush had been hoping for a "glide path" to balance by 2012 but the housing crash and slowing economy have put paid to those hopes. in February, Bush and Congress agreed a $152 billion economic stimulus programme.