WASHINGTON, Feb 5 (Reuters) - The U.S. government's budget deficit soared to $563 billion during the first four months of the fiscal year that began on Oct. 1, the Congressional Budget Office said on Thursday, in an estimate that includes money spent to bail out the ailing financial sector.
In a monthly budget update, the CBO noted $284 billion in spending for the Troubled Asset Relief Program, or TARP, which was enacted last October to help banks and other financial institutions.
That bailout, coupled with huge anticipated government spending to help bring the U.S. economy out of a year-long recession, has led many experts to predict a government budget deficit of $1 trillion or more this year -- double last year's red-ink.
Washington could recoup some of its investments in financial firms and the CBO was calculating the potential cost of the program in a couple ways. Using an alternate approach, the CBO estimated government outlays under TARP at $76 billion through January, leading to an estimated U.S. budget deficit of $355 billion through January.

In further evidence of the deepening U.S. recession, the nonpartisan budget analyst for Congress noted the government's revenues were down about $29 billion in January, or 11.5 percent, compared to January, 2008, "as the effects of the recession continued to reduce tax collections."
At the same time, the CBO said government payments for unemployment benefits in the deepening recession and other expenses were accelerating.
Amid the bleak fiscal and economic scene, Congress is advancing legislation that could cost $800 billion or more to help stimulate the economy.
But House Speaker Nancy Pelosi pledged on Thursday that once this measure is enacted, possibly within a week or so, lawmakers would aim to keep government spending in check.

(Reporting by Richard Cowan, editing by Anthony Boadle) Keywords: USA ECONOMY/DEFICIT (richard.cowan@thomsonreuters.com; Reuters Messaging: richard.cowan.reuters.com@reuters.net; 202-898-8391)

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