Uncle Sam: $407 billion in the hole

The budget deficit will jump by $246 billion to $407 billion this year, the Congressional Budget Office estimates in a report released Tuesday.

Over the long run, growing budget deficits and the resulting increases in federal debt would lead to slower economic growth," the agency said.

The budget deficit shot up 153% from last year's shortfall of $161 billion. The government's fiscal year ends Sept. 30. The agency attributes the jump to "a substantial increase in spending and a halt in the growth of tax revenues."

That drop in revenue is driven in part by an estimated 15% decline in corporate tax receipts. They fell as a result of lower corporate profits and tax rules governing how businesses depreciate their investments this year. A second factor is the rebates provided to tax filers from the economic stimulus law Congress passed earlier this year.

The spending hike is partly due to efforts by the government "to cover the insured deposits of insolvent financial institutions," the agency said.

To date, 11 banks have been seized by the FDIC this year - not a high number historically, but higher than it's been in recent years - and that number is expected to grow in the coming months.

The CBO said it expected the deficit to exceed $400 billion - or 3% of gross domestic product - for each of the next two years if current policies remain in place. It also forecast several more months of "very slow" economic growth.

(Via CNN)