Fiscal 2008 budget deficit seen about $400 billion

WASHINGTON (Reuters) - Falling government revenues amid a slowing economy, coupled with increased federal spending, will result in a U.S. budget deficit this year of around $400 billion, the Congressional Budget Office estimated on Wednesday.

The $400 billion cited by Congress' budget analysis office for the 2008 fiscal year ending September 30 is slightly higher than the White House's deficit estimate of $389 billion.

Either way, this year's budget shortfall likely will approach the record-breaking deficit suffered in fiscal 2004 of $412.7 billion.

In its "mid-session review" issued July 28, the White House predicted that next year's budget deficit could hit $482 billion, not counting the full cost of the Iraq war and other possible government expenditures.

After steadily rising from 2002-2004, during President George W. Bush's first term, budget deficits had been declining since fiscal 2005, with many predicting a "glide path" to balance by 2012.

Last year, the budget deficit was $162 billion.

But with the U.S. economy struggling, largely due to a housing slowdown and credit crunch that is rippling through the economy, Congress and Bush agreed on an economic stimulus program in February. That is costing the government $152 billion this year, largely due to tax rebates aimed at stimulating consumer spending.

That unexpected spending, along with revenues that were running below last year's and added funding for the Iraq war, have contributed to the larger deficit this year.

"The Bush administration converted record surpluses into record deficits, and left the outlook for next year even worse," said House Budget Committee Chairman John Spratt, a South Carolina Democrat.

The latest deficit forecast was very close to the projection the CBO it gave in March, when it said this year's deficit likely would be $396 billion.

(Reporting by Richard Cowan, editing by Chris Wilson)