By David Clarke, CQ Staff

The budget deficit almost tripled during the fiscal year that ended last month and analysts are warning the government’s red ink could grow much higher this year.

The fiscal 2008 deficit came in at $454.8 billion, which is a sharp increase over the $161.5 billion in red ink recorded in fiscal 2007. The fiscal year ended Sept. 30 and Treasury released the final deficit figure on Tuesday.

Administration officials said the reason for the increase can be attributed to the slowing economy’s impact on individual and corporate tax receipts as well as the economic stimulus package (PL 110-185) enacted in February, $116 billion of the which was added to the deficit.

“This increase reinforces the need to adopt and maintain policies that promote economic growth and fiscal responsibility, including entitlement reform and pro-growth tax policies,” White House Budget Director Jim Nussle said in a statement.

The fiscal 2008 figure is a record in dollar terms surpassing the previous high of $412 billion, which was recorded in fiscal 2004. Neither, however, is a record when measured against the size of the economy (gross domestic product), which is the measure preferred by economists. When looked at in those terms the post World War II era record occurred in 1983 when the deficit hit 6 percent of GDP. The fiscal 2008 deficit is 3.2 percent of GDP.

The government’s budget picture looks to be getting worse this year, a situation that could cause heartburn for the next administration as it decides what campaign promises to try to turn into law.

“The reality is that the next president will be inheriting a fiscal and economic mess of historic proportions – the legacy of President Bush’s failed policies,” Senate Budget Committee Chairman Kent Conrad , D-N.D., said in a statement.

The fiscal 2009 deficit could be in the range of $1 trillion, according to analysts, depending on a variety of factors. A number this high would be hard to ignore politically. In July, before the recent financial crisis, the administration projected a fiscal 2009 deficit of $482 billion.

At the top of the list is the recently enacted financial sector rescue plan (PL 110-343) that allows the Treasury to buy $700 billion worth of a variety of assets.

This week Treasury officials said they plan to use $250 billion of this authority to buy equity in financial companies, including $125 billion in nine of the largest banking institutions. Stephen McMillin, deputy director of the Office of Management and Budget, said this cost would be added directly to the deficit.

How to estimate, or score, the cost of the financial rescue package has been a question since Treasury first made the proposal last month. When the focus was on buying mortgage assets there was agreement among the administration and members of Congress that the full cost of purchasing these securities should not be added to the deficit. Instead they would be scored using the same rules the government uses to assess the cost of a loan. Under this system only a small fraction of the size of a loan, the estimated subsidy the government is providing the recipient, is added to the deficit.

But Treasury has now changed part of its strategy for dealing with the financial crises and is buying equity in firms with part of the $700 billion it is authorized to spend. McMillin said the full cost of equity purchases will be added to the deficit.

While this may make the short-term deficits look worse, the full cost of that transaction will go to reducing the deficit when the government eventually sells these assets.