CBO projects record $477 billion deficit

WASHINGTON (AP) — The federal deficit will hit a record $477 billion this year and get worse if lawmakers cut taxes or increase spending, the Congressional Budget Office projected Monday in a report sure to become ammunition in the election-year fight over red ink.

WASHINGTON (AP) — The federal deficit will hit a record $477 billion this year and get worse if lawmakers cut taxes or increase spending, the Congressional Budget Office projected Monday in a report sure to become ammunition in the election-year fight over red ink.

In its annual wintertime economic outlook, lawmakers’ nonpartisan fiscal analyst also estimated that the deficit would ease to $362 billion in 2005, according to numbers obtained by The Associated Press.

The budget office also estimated that deficits for the decade ending in 2013 would total nearly $2.4 trillion. The August report foresaw deficits totaling $1.4 trillion over 10 years.

The added red ink was due in part new costs such as the prescription drug benefit created last year.

President Bush plans to send Congress a $2.3 trillion budget for that year next Monday in the face of growing criticism by Democrats and conservatives over increased spending and surging federal shortfalls.

The figures were similar to the budget office’s last report as the added costs for the newly passed Medicare expansion were offset by higher revenue generated by the improving economy. In August, lawmakers’ nonpartisan fiscal analyst envisioned shortfalls of $480 billion for this year and $341 billion for 2005.

Even so, underscoring the political pressure he feels, Bush and administration officials have said their budget will propose cutting the deficit to half of this year’s level by 2009.

No details from Bush

Bush has so far revealed no details of how he would achieve that. Democrats say his goal would be a minimal accomplishment because deficits are so high to start with. They also say it is meant as a distraction from the even deeper deficits expected when baby boomers retire in force just beyond a decade from now.

The deficit hit $375 billion in 2003, the highest in dollar terms ever. The previous record was $290 billion in 1992. Administration officials say the more important measure is how the shortfall compares to the size of the U.S. economy, a measure by which today’s red ink is smaller than it was in the 1980s.

All the estimates assume lawmakers will not rewrite any tax laws and let spending grow only at the rate of inflation.

Because tax and spending changes are inevitable, the forecasts are not meant as a prediction. Rather, they provide lawmakers with a baseline from which to measure the effect their policies would have on the budget.

Many analysts say the budget office’s deficit projections will probably prove too low — especially in the long-term — because they omit expenses the president and Congress are likely to approve.

These include making at least some tax cuts permanent, changing the alternative minimum tax so it doesn’t affect growing number of middle-income earners, and spending increases for popular programs or unforeseen needs like war or disasters.

Wars’ impact

The projections also assume $87.5 billion approved last November for wars in Iraq and Afghanistan will be approved anew every year throughout the decade — which is unlikely to occur.

The two parties are already fighting over the red ink that has materialized during the Bush years.

The budget’s health has taken an abrupt nosedive after four straight years of annual surpluses that ran through 2001.

Only last January, the budget office estimated 10-year surpluses — not deficits — of $1.3 trillion. And in January 2001, when Bush took office, the projection was for a decade of black ink totaling $5.6 trillion.

Republicans say Bush is not to blame for the turnabout. Analysts say the surpluses have dissolved due to the recession, the tax cuts Bush pushed through Congress, and growing spending for defense, Medicare and other programs.

Even so, many Republicans have grown increasingly uneasy with the shortfalls. The public has mostly ignored the budget gaps, focusing instead on the economy, war and terrorism, but recent polls indicate people are paying more attention.

Author:

News Service: CNN.com

URL: http://www.cnn.com/2004/US/01/26/budget.deficits.ap/index.html