Budget deficit tops $1 trillion for first time

WASHINGTON — The federal deficit has topped $1 trillion for the first time ever and could grow to nearly $2 trillion by this fall, intensifying fears about higher interest rates, inflation and the strength of the dollar.

The deficit has been widened by the huge sum the government has spent to ease the recession, combined with a sharp decline in tax revenues. The cost of wars in Iraq and Afghanistan also is a major factor.

The soaring deficit is making Chinese and other foreign buyers of U.S. debt nervous, which could make them reluctant lenders down the road. It could also force the Treasury Department to pay higher interest rates to make U.S. debt attractive longer-term. (more)