[Mb-civic] White House Projects Highest Deficit Ever

[Michael Butler]

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    White House Projects Highest Deficit Ever
     By The Associated Press
     The New York Times

     Saturday 31 July 2004

     Washington - This year's federal deficit will soar to a record $445
billion, the White House projected Friday in a report provoking immediate
election-season tussling over how well President Bush has handled the
economy.

     The administration's annual summertime budget update forecast
shortfalls falling to $331 billion next year, then fading to $229 billion by
2009. For each year, the red ink was smaller than the White House envisioned
six months ago.

     The analysis was released the same day the Commerce Department said
economic growth slowed this spring to an annual rate of 3 percent, well
below the 3.8 percent spurt that many economists expected. The slowdown was
caused by a spending cutback by consumers in the face of high gasoline
costs, the department said.

     Administration officials hailed the budget figures as a solid
improvement over the deficits analysts forecast early this year, and said
they were on their way to their goal of halving this year's shortfall in
five years. The White House estimated a $521 billion budget gap for 2004 in
February, while the nonpartisan Congressional Budget Office predicted a $477
billion deficit.

     "This improved budget outlook is the direct result of the strong
economic growth the president's tax relief has fueled," said White House
budget director Joshua Bolten.

     He conceded that the red ink remained at "unwelcome" levels, but said
the report was still "good news" because of the reduction from earlier
estimates.

     Democrats contrasted the $445 billion projection with the $262 billion
surplus for this year that Bush projected in 2001, when he was persuading
Congress to approve the first of his tax cuts.

     The shortfall will be the third consecutive - and ever-growing -
deficit under Bush, following four consecutive annual surpluses under
President Clinton. Democrats said the turnabout underscored the damage done
by Bush's tax cuts and his poor stewardship of the economy, and criticized
the White House praise for the report.

     "What we've got now is a president of the United States who is actively
misleading the American people on the financial condition of the country,"
said Sen. Kent Conrad of North Dakota, top Democrat on the Senate Budget
Committee. "Shame on him."

     The White House attributed this year's improvement to the collection of
$82 billion more in revenue than anticipated, reflecting stronger economic
activity. That was partly offset by $6 billion more in spending than
expected, largely for Medicaid and Medicare.

     The projection, if accurate, would mean the government will have to
borrow 19 percent of the $2.32 trillion it expects to spend this year.

     Last year's $375 billion deficit was the largest ever. When adjusted
for the loss of purchasing power caused by inflation, only the shortfalls
during World War II have exceeded the projected $445 billion shortfall.

     The Concord Coalition and the Committee for a Responsible Federal
Budget, bipartisan groups that advocate balanced budgets, said the report
showed deficits must be controlled.

     "We cannot continue to allow this burden to multiply for our children
and our children's children," said Maya MacGuineas, the committee's
executive director.

     The White House said this year's actual deficit could well be smaller
because federal agencies often overestimate expected spending. The
government's budget year runs through Sept. 30, so the final figures will be
in shortly before the Nov. 2 elections.

     Administration officials say a $445 billion deficit would be manageable
because it would be 3.8 percent the size of the economy - well under the 6
percent ratio during the worst of the red ink under President Reagan.

     "I am pleased with the direction we are moving in," said House Budget
Committee Chairman Jim Nussle, R-Iowa. Continuing a Republican theme, he and
others said the numbers showed spending must be constrained.

     Democrats said by only extending five years, the projections ignored
the longer-term budget crisis looming as the baby boom generation starts
retiring later this decade.

     The report included the $25 billion Congress recently approved for U.S.
action in Iraq and Afghanistan. But Democrats noted it ignored the next
request for those wars the White House will make early next year, and the
costs of easing the alternative minimum tax's effect on middle-income
families.

     "There's no shock, there's no shame and there's no solution" from the
White House, said Rep. John Spratt of South Carolina, lead House Budget
Committee Democrat.

     The report also boosted the estimate of Medicare spending by $67
billion over the next five years. It said $26 billion was to correct costs
left out of Bush's budget last February, with the rest reflecting new
estimates for the program's spending.

     Medicare, the government's health insurance program for the elderly and
disabled, spends about $300 billion a year. It already faces questions about
its solvency because of the burden the baby boomers will place on it, and
growing medical costs.

     The report was released a day after the Democratic National Convention
and the same day Congress began hearings on the Sept. 11 commission's final
report. The deficit projection was due July 15, a date often ignored by
administrations of both parties.

     Bolten said the report was not ready earlier, but Democrats said the
timing was aimed at hiding it.

  

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