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White House, Congressional Analysts Predict Record Deficit

The White House and Congressional Budget Office are predicting the U.S. federal deficit will grow to $1.6 trillion in the current fiscal year.

As a share of the economy, that is the biggest federal deficit to hit the United States since World War II.

But the White House and Congress differ over a 10-year forecast for the deficit.

The White House Office of Management and Budget is predicting the federal deficit will reach $9 trillion in the next decade - $2 trillion higher than its previous estimate.

Meanwhile, the non-partisan Congressional Budget Office lowered its estimate of the government's 10-year budget deficit to just over $7 trillion.

The lower figure is based on projections of an economic recovery and low inflation.

The government often operates with a deficit. But the two wars in Iraq and Afghanistan, and the financial crisis, have pushed the deficit to new highs.

Some economists say the U.S. financial crisis was caused in part by a collapse in the housing market.

An index of home prices in 20 major U.S. cities showed Tuesday that home values rose for the first time in three years during April, May and June.

The index - the Standard & Poor's - Case Shiller housing index - rose nearly three percent from the first quarter. Still, it is down nearly 15 percent from the same period last year.

A second report by the Federal Housing Finance Agency shows home prices rose 0.5 percent from May to June, but fell 6.1 percent from a year earlier.

Changes in home values can affect consumer spending. Analysts consider a rise in prices a good sign that the market is starting to recover.

A separate survey released Tuesday by the U.S. Conference Board says the confidence consumers have in the economy and job market improved significantly in August.

The Consumer Confidence index rose to 54.1 percent, up from 47.4 percent in July. The survey associates the number 90 to a healthy economy, and 100 to strong growth.

Economists closely watch confidence as an indication of future consumer spending, which accounts for more than 70 percent of all U.S. economic activity.