Budget Office Projects U.S. Deficit to Hit
$477 Billion
Budget numbers likely part of
election battle
Monday, January 26, 2004 Posted: 1:22
PM EST (1822 GMT)
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.