Jump to content
Clubplanet Nightlife Community
Sign in to follow this  
sassa

White House Projects Deficit to Reach $165 Billion

Recommended Posts

White House Projects Deficit to Reach $165 Billion

By THE ASSOCIATED PRESS

Filed at 6:13 p.m. ET

WASHINGTON (AP) -- The government will run a $165 billion deficit this year, the first red ink in four years, but surpluses should return by 2005, the Bush administration said Friday.

The budget's sudden plunge from last year's $127 billion surplus was no surprise. Analysts have predicted it because of the flagging economy, the financial markets' swoon, and the costs of both last year's tax cuts and the government's response to the Sept. 11 terrorist attacks.

Even so, the new figure was larger than the $106 billion shortfall the White House envisioned just five months ago. Both parties immediately cited the projections in their campaigns for control of Congress.

Democrats said they believed the White House was being unrealistically optimistic about the budget's return to balance soon, and cited the tax cut President Bush pushed through Congress last year as the primary cause of the long-term fiscal decay. They said the administration was using inflated expectations about revenue growth, especially from corporate profits, and was ignoring the bipartisan desire to beef up spending for defense and domestic security.

``They have now adopted the practices of part of corporate America of hiding deficits and debt,'' said Senate Budget Committee Chairman Kent Conrad, D-N.D. ``They have now wandered off to fantasy land.''

Democrats also argued that the White House numbers show that the government will dip deeply into Social Security surpluses in the next few years to pay for other programs. That is something both parties have pledged to avoid in a bid to attract support from older voters, even though using those surpluses has no effect on Social Security's solvency or benefits.

White House budget chief Mitchell Daniels said the recession and the war were the chief culprits. In particular, he cited a sudden drop in revenue from taxes on capital gains, mutual fund distributions and stock options, a reversal of the unexpected receipts the government collected as stock markets soared in the late 1990s.

``No one saw this coming,'' he said.

Daniels also said the revival of red ink spotlights the need to clamp down on federal spending. The administration is currently involved in a bitter fight with lawmakers of both parties over the price tag of a roughly $30 billion anti-terrorism bill.

``This president doesn't intend to spend a single taxpayers' dollar unnecessary,'' Daniels said. ``Right now, every dollar does count.''

The White House sees the deficit shrinking to $109 billion in the next budget year, which starts Oct. 1, and a $53 billion surplus in 2005, Daniels said. The administration projected $827 billion in surpluses for the decade beginning 2003, down from the $1 trillion it estimated in February.

Yet Daniels conceded there was no assurance of balancing the budget without three occurrences: Better economic growth, no unexpected war-related events and holding spending increases to 3 to 4 percent annually over the next decade. Continuing the 7 percent spending growth of recent years would cost $2 trillion over the period, he said.

``It's the difference between surpluses and large, permanent deficits,'' he said.

Even so, Bush's own budget proposes a 10 percent spending increase for next year, mostly for defense and domestic security. Bush would hold all the growth of all other programs except automatic benefits like Medicare to 2 percent, less than inflation.

Democrats were not the only ones expecting a worsening budget picture next year. The Senate Budget Committee's Republican staff projected recently that the 2003 deficit would be $194 billion -- nearly double Daniels' prediction.

The nonpartisan Congressional Budget Office plans to release its updated forecasts in August.

Daniels said the economy has been stronger than expected lately, letting the administration project 2002 economic growth at 2.6 percent instead of the 0.7 percent it forecast in February.

But with personal income tax collections lagging -- especially taxes on income like capital gains and executives' bonuses -- the White House now expects total 2002 revenue of $1.867 trillion. That is $124 billion, or 6 percent, less than 2001.

Yet the White House is projecting an 8.7 percent revenue increase in 2003 to $2.029 trillion, which Daniels attributed to a bounce back from the recession.

As the economy improves, the administration is also forecasting that corporate profits will grow by more than 20 percent from 2002 to 2003, and from 2004 to 2005. The tax on those profits is a major part of federal revenues.

``It's buried in the detail, and it's a critical detail that shows you why we're skeptical,'' said Rep. John Spratt of South Carolina, the House Budget Committee's top Democrat.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

Sign in to follow this  

×