Budget deficit nears record under latest estimates

WASHINGTON (AP) -- New estimates say the federal government will run a deficit reaching $407 billion for the budget year ending Sept. 30.

Congressional officials briefed on new Congressional Budget Office estimates say the flood of red ink will spill over into next year, when the deficit would reach a record $438 billion - and could go even higher as the government takes over mortgage giants Fannie Mae and Freddie Mac.

The CBO figures for this year are slightly worse than White House predictions released in July.

The new figures, while expected, offer fresh evidence of the difficult fiscal environment facing the next president. Many budget experts believe either Democrat Barack Obama or GOP nominee John McCain will have to ratchet back their first year agenda because of the bleak budget picture.