CBO: Budget Deficit $1.2 Trillion

The federal budget deficit will nearly triple to an unprecedented $1.2 trillion for the 2009 budget year, according to grim new Congressional Budget Office figures.

The eye-popping estimates reflect plummeting tax revenues because of the recession and about $400 billion spent to bail out the financial industry and take over Fannie Mae and Freddie Mac. Last year's deficit was $455 billion.

The CBO estimate released Wednesday also sees the economy shrinking by 2.2 percent this year and recovering only slightly to grow by 1.5 percent in 2010. It foresees the unemployment rate eclipsing 9 percent early next year unless the Obama administration steps in.

"The recession — which began about a year ago — will last well into 2009," the CBO report says. The agency said that "ongoing turmoil in the housing and financial markets has taken a major toll on the federal budget."

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