Deficit Projections Soar to $455B
The Bush administration dramatically raised its budget deficit projections on Tuesday to $455 billion for this year and $475 billion for next, record levels fed by the limp economy, tax cuts and the battle against terrorism.
The totals would easily surpass the $290 billion shortfall of 1992 that has been the red ink high water mark until now. They also mark a deterioration by more than 50 percent since February.
The shortfalls would drop to $213 billion in 2007, before edging back up to $226 billion the following year — underscoring that major budget challenges will loom just as the huge baby boom generation begins to retire and relies ever more on federal benefits like Social Security.
The White House tried to lay the extraordinary deficit numbers off as nothing more than a "manageable concern," in other words, no big deal, reports CBS News Chief White House Correspondent John Roberts.
"The deficit certainly remains a concern, but it's one that is manageable and it's one that we are addressing," White House spokesman Scott McClellan told reporters. "Over the next few years, we will cut this deficit in half. It is a priority that we are addressing."
McClellan provided no details on how Mr. Bush will achieve such a major reduction in the budget shortfall, or precisely how long that would take.
Democrats in Congress and on the campaign trail linked the unprecedented red ink to what they call Mr. Bush's mismanagement of the economy.
Rep. Richard Gephardt, D-Mo., a presidential candidate, called the deficit numbers a result of Mr. Bush's "abysmal and poor" economic record.
Democrats also said the numbers masked a budget problem far worse than advertised, noting that the White House excluded the costs of a U.S. role in Iraq beyond this year. In addition, the administration only projected five years into the future, missing the massive long-range costs of Mr. Bush's plan to make recent tax cuts permanent, and of the retirement of the 75-million strong baby boom generation later this decade.
"Total fiction," Sen. Kent Conrad of North Dakota, top Democrat on the Senate Budget Committee, said of the new Bush numbers.
And it's not just Democrats who are complaining; conservative Republicans are stunned at the deepening sea of red ink. The White House is paddling hard to keep its political head above water.
"Restoring a balanced budget is an important priority for this administration," White House budget director Joshua Bolten told reporters. "But a balanced budget is not a higher priority than winning the global war on terror, protecting the American homeland, or restoring economic growth and job creation."
Federal Reserve Chairman Alan Greenspan told a House committee Tuesday that he still supports tax reductions to spark the languid economy. But he said the cuts should be paid for with spending reductions or tax increases to keep deficits from growing — a comment that could complicate future GOP drives for new tax cuts,
To justify its prediction of shrinking deficits beginning in 2005, the White House envisions robust economic growth resuming this summer, producing more jobs and corporate profits and more federal revenue.
It also assumed that Congress will heed Mr. Bush's call for tight limits on the growth of most federal programs, besides defense, domestic security and automatic benefits like Social Security. Citing pressing needs, lawmakers have been unwilling to do that during Bush's first two years in office.
Even if the projections come true, they would still mark a head-turning about face in the government's fiscal status.
In his first months in office in 2001, Mr. Bush projected federal surpluses totaling $5.6 trillion from 2002 through 2011. Now, actual deficits and Bush projections total $2.1 trillion in red ink for the first seven years of that period — a $7.7 trillion reversal.
Bolten said the rosy 2001 estimates did not factor in a recession, a stock market collapse, the Sept. 11 terrorist attacks, a war on terrorism or corporate scandals. The report said the largest factor for the turnabout has been lower revenue and higher spending caused by the weak economy — accounting for 53 percent of the change in the projected 2003 deficit, and 44 percent of the change in the budget's bottom line from 2004 through 2008.
The next largest factors have been the cost of tax cuts and higher spending, largely for defense and domestic security.
Bolten also said the more important measure of deficits is how they compare to the size of the U.S. economy, since that shows how much of an economic drag the shortfalls are.
The projected deficits for 2003 and 2004 would each be about 4.2 percent as large as the economy — numbers Bolten said were "manageable." Even so, they begin to near the relative sizes of deficits in the 1980s and early 1990s that helped spur that era's politicians — including the first President Bush — into deficit-cutting compromises.