The Treasury Department announced the figure Thursday, two weeks after the government's 2004 budget year ended and just 19 days from an Election Day (search) in which Bush's economic and fiscal performance are pivotal issues.
The number easily surpassed the previous record in dollar terms, the revised $377 billion shortfall of 2003. It was the highest deficit since World War II when inflation is factored out.
Republicans emphasized that the figure was an improvement from earlier deficit projections. At the beginning of this year, the White House projected a $521 billion shortfall for 2004 and the Congressional Budget Office forecast a gap of $477 billion, though both lowered their forecasts as the year progressed.
"While the deficit is unwelcome, if we stick with the president's plan of economic growth and spending discipline, we will continue to see improvement and we will cut the deficit by more than half in five years," said White House budget director Joshua Bolten.
Citing data pointing to economic improvements, Treasury Secretary John Snow said, "All of this shows that the president's tax relief initiatives are having the intended effects."
Democrats said those arguments ignored the budget's dramatic four-year decline. Bush took office after a four-year string of federal surpluses, and the 2004 surplus of $387 billion that he forecast upon taking office became an actual deficit of $413 billion — an $800 billion reversal.
"President Bush has never been straightforward that the deterioration in our deficit is not short term, but a dramatic long-term deterioration," said Gene Sperling, an economic adviser to Democratic presidential candidate Sen. John Kerry of Massachusetts.
"The American people deserve ... a president who doesn't try to mislead them about the true fiscal condition of the country, and they deserve a president who will put this country back on a course of fiscal responsibility," said Sen. Kent Conrad, D-N.D., a senior member of the Senate Budget Committee.
The Treasury released the deficit figure the same day it announced the government has begun using accounting procedures to avoid hitting the $7.4 trillion statutory national debt limit.
Eager to avoid a fight that would let Democrats call attention to the government's red ink, Republican leaders have put off consideration of legislation to boost the government's borrowing authority until after the elections.
"Given current projections, it is imperative that the Congress take action to increase the debt limit by mid-November" when "all of our previously used prudent and legal actions to avoid breaching the statutory debt limit will be exhausted," Snow wrote House and Senate leaders of both parties.
Snow's actions were taken with the total national debt at $7.379 trillion on Wednesday, the latest day available, just $4.1 billion below the current limit set by Congress of $7.384 trillion.
When the government runs an annual deficit, it must borrow money to finance its operations, driving its accumulated debt ever higher.
The government spent $2.292 trillion last year and collected $1.88 trillion in revenue, the Treasury Department said.
The administration and congressional Republicans say the most important measure of the deficit is that the 2004 shortfall was an estimated 3.6 percent the size of the economy. That is well below the worst-ever 6 percent figure set in 1983 under President Reagan.
Many economists agree that such a comparison is more significant because it shows how affordable the deficit is for the nation. But many of them are uncomfortable with shortfalls of that size because deficits are expected to worsen later this decade when the huge baby boom generation begins drawing on Social Security and Medicare.