The US federal budget deficit will hit an all-time high of US$1.2 trillion in the 2009 fiscal year, which ends on September 30 this year, the Congressional Budget Office (CBO) estimated on Wednesday.

The estimate doesn't include the cost of a huge economic stimulus bill that US President-elect Barack Obama is seeking approval from Congress. The bill would total nearly US$775 billion over next two years, according to news reports.

The US$1.2-trillion deficit shatters the previous record of US$455 billion set last year. It also represents more than 8 percent of the size of the economy, which is higher than the deficits of the 1980s.

Meanwhile, the CBO also projects that the US economy will shrink 2.2 percent this year and recover slightly in 2010. It expects the nation's unemployment rate to surge to over 9 percent early next year unless the government takes actions.

"The recession -- which began about a year ago -- will last well into 2009," the CBO said.

In the 2007 fiscal year, the federal deficit dropped by 34.4 percent to 162 billion dollars, a five-year low since an imbalance of 159 billion dollars in 2002, reflecting faster growth in government revenues than spending.

The 2002 performance marked the first budget deficit after four consecutive years of budget surpluses.

After meeting with his economic team on Tuesday, Obama said that it was possible that trillion-dollar deficits could stretch into coming years and that he and his team want to instill a "sense of responsibility" about future budget choices.

"I'm going to be willing to make some very difficult choices in how we get a handle on this deficit," the president-elect said.

He is to deliver a speech on Thursday about the economy.

(Xinhua News Agency January 8, 2009)