Joel Kaplan, deputy director of the White House Office of
Management and Budget, told reporters on Thursday the sharp spike was partly attributed to increased government spending to help the hurricane-stricken US Gulf coast.   

"Our new projections for 2006 will be released formally when the budget is released in the first week in February," Kaplan said, "but our preliminary calculations indicate that we'll project a deficit that increases from the 2005 level and exceeds $400 billion, or 3.1% of GDP".

The new deficit projection was likely to further intensify a debate leading up to mid-term elections in November on whether to renew President George Bush's tax cuts that he says are essential for economic growth but which Democrats say are a drain on the budget.

Kaplan, however, said White House officials believed that by sticking to Bush's economic policies and spending restraint "we will return to our downward trajectory and remain on (a) path to cut the deficit in half by 2009".

A July forecast had projected the 2006 budget deficit at $341 billion.

Katrina costs

"As a government, we must continue to try to control the rate of growth of spending"

Judd Gregg,
Senate Budget Committee chairman

Kaplan said the costs of recovering from Katrina, which ravaged New Orleans and the Gulf Coast in late summer, represented a "temporary event".

A more precise deficit projection is expected in the proposed federal budget for the 2007 fiscal year - starting next October - that Bush will submit to Congress in early February.

That budget is shaping up to be a lean one as the Bush administration seeks to reduce spending growth.

The administration disclosed the new deficit number in a conference call with reporters shortly after the stock market closed for the day and as Bush toured the Gulf Coast area.

Spending pressures

In the wake of the hurricane Bush vowed the administration would "do what it takes" to rebuild New Orleans and the Gulf Coast. He has not backed away from that pledge but pressure from conservatives led him to seek spending cuts to offset Katrina costs.

In Bay St Louis, Mississippi, on Thursday, Bush said the federal government had committed $85 billion so far to the effort and that $25 billion has been spent.

"That's $60 billion more coming your way," he said. The US Senate last month approved a bill that would cut spending on social welfare and other programmes by $39.7 billion.

But small, last-minute changes pushed by Democrats mean the bill must go back to the US House of Representatives for another vote, delaying final approval until late January or February.

Senate Budget Committee Chairman Judd Gregg, a New Hampshire Republican, said the deficit increase was understandable but that it was "still unacceptable".

"As a government, we must continue to try to control the rate of growth of spending, especially in the entitlement accounts," Gregg said.