The administration said the deficit was being driven to an all-time high by the sagging economy and the stimulus payments being made to 130 million households in an effort to keep the country from falling into a deep recession. But the numbers could go even higher if the economy performs worse than the White House predicts.
The budget office predicts the economy will grow at a rate of 1.6 percent this year and will rebound to a 2.2 percent growth rate next year. That's a half percentage point more than predicted by the widely cited "blue chip" consensus of leading economists. The administration also sees inflation averaging 3.8 percent this year, but easing to 2.3 percent next year - better than the 3.0 percent seen by the blue chip panel.
"The nation's economy has continued to expand and remains fundamentally resilient," said the budget office report.
A $482 billion deficit, however, would easily surpass the record deficit of $413 billion set in 2004.
The deficit numbers for 2008 and 2009 represent about 3 percent of the size of the economy, which is the measure seen as most relevant by economists. By that measure, the 2008 and 2009 deficits would be smaller than the deficits of the 1980s and early 1990s, when Congress and earlier administrations cobbled together politically painful deficit-reduction packages.
The administration actually underestimates the deficit, however, since it leaves out about $80 billion in war costs. In a break from tradition - and in violation of new mandates from Congress - the White House did not include its full estimate of war costs.
The White House in February had forecast that next year's deficit would be $407 billion, which puts the increase in the projections at $72 billion.
Figures for the 2008 budget year ending Sept. 30 will actually drop from an earlier projection of $410 billion to $389 billion, the report said.
The White House still projects that the budget will reach a surplus by 2012, helped by revenues boosted by optimistic economic projections of economic growth.
Still, the new figures are so eye-popping in dollar terms that it may restrain the appetite of the next president to add to it with expensive spending programs or new tax cuts. In fact, pressure may build to allow some tax cuts enacted in 2001 and 2003 to expire as scheduled at the end of 2010, with Congress also feeling pressure to curb spending growth.
In Washington today Barack Obama huddled with his economic team, people who've served presidents from Carter to Clinton, even George W. Bush, reports CBS News Capitol Hill correspondent Chip Reid.
"We have to change course and we're going to take immediate action," Obama said.
One of his first priorities will be ending the Bush tax cuts for people making more than $250,000 a year, and using the money for a tax cut for the middle class.
But Obama has also called for more spending -- on everything from universal health care to a new economic stimulus package -- and with the deficit now soaring even these great minds may have trouble finding the money.
John McCain has also surrounded himself with some of the best minds in business, Reid reports, including Carly Fiorina, former CEO of Hewlett Packard, and Meg Whitman former head of E-bay.
Today they briefed reporters on the importance of cutting taxes on business to create jobs.
"Small business is the engine of growth in this economy," Fiorina said.
McCain says he'll balance the budget by the end of his first term, but critics wonder how that's possible given his support for extending all of the Bush tax cuts, Reid reports.
McCain used the news to slam both the Bush White House for its "profligate spending" and Democratic rival Barack Obama for saying he would not try to balance the budget.
"I have an unmatched record in fighting wasteful earmarks and unnecessary spending in the U.S. Senate and I have the determination and experience to do the same as President," McCain said in a statement.
Obama's campaign used the new numbers to attack McCain for embracing Bush's tax cuts. Obama, said campaign policy director Jason Furman, "will restore balance and fairness to our economy by cutting wasteful spending, shutting corporate loopholes and tax havens, and rolling back the Bush tax cuts for the wealthiest Americans, while making health care affordable and putting a middle class tax cut in the pocket of 95 percent of workers and their families."
The deficit for 2007 totaled $161.5 billion, which represented the lowest amount of red ink since an imbalance of $159 billion in 2002. The 2002 performance marked the first budget deficit after four consecutive years of budget surpluses.
That stretch of budget surpluses represented a period when the country's finances had been bolstered by a 10-year period of uninterrupted economic growth, the longest period of expansion in U.S. history.
In his first year in office, helped considerably by projections of continuing surpluses, Bush drove through a 10-year, $1.35 trillion package of tax cuts.
However, the country fell into a recession in March 2001 and government spending to fight the war on terrorism contributed to pushing the deficit to a record in dollar terms in 2004.
House Budget Committee Chairman John Spratt, D-S.C., said the new deficit figure confirms "the dismal legacy of the Bush administration: under its policies, the largest surpluses in history have been converted into the largest deficits in history."