posted on August 26, 2003 10:04:47 AM newWhere's Bill Clinton When we need Him.
Congress Forecasts $480 Billion Deficit
1 hour, 18 minutes ago Add Business - Reuters to My Yahoo!
By Andrew Clark
WASHINGTON (Reuters) - The U.S. Congressional Budget Office (news - web sites) on Tuesday forecast a federal budget deficit of $480 billion in 2004, a record shortfall that could pose problems for President Bush (news - web sites) as he seeks re-election.
delayed 20 mins - disclaimer
Quote Data provided by Reuters
How to Copy Your DVDs
Get the know-how and tools to backup your favorites.
In its bi-annual budget and economic outlook, the nonpartisan agency also confirmed an earlier prediction of a $401 billion deficit in 2003 and forecast a cumulative budget deficit of just under $1.4 trillion over the next decade.
The report comes as the latest blow in a relentless drumbeat of fiscal bad news that has put the Bush administration on the political defensive.
The White House itself last month predicted that federal budget deficits would balloon to $455 billion this year and $475 billion in 2004 -- far above the previous record of $290 billion reached in 1992 -- even without factoring in the mounting cost of the U.S. occupation of Iraq (news - web sites).
CBO forecast a smaller deficit this fiscal year, which ends on Sept. 30, mainly because it assumed previously earmarked Iraq funds were being spent more slowly.
But both Democratic and Republican budget analysts agree the actual deficit in 2004 could well come in higher than the agency's estimate -- possibly topping $500 billion once likely new Iraq war spending requests are included.
Democrats blame Bush's tax cuts for the steep slide in the government's fiscal position since it enjoyed a record surplus of $236 billion in 2000, and say they fear deficits will persist long after the weak U.S. economy recovers.
"DEFICITS ARE HERE TO STAY"
"CBO's forecast is the latest confirmation that the budget deficits are here to stay and will worsen without major changes in policy," said South Carolina Rep. John Spratt, the top Democrat on the House of Representatives Budget Committee.
Republicans argue that the cuts have boosted economic growth and note the projected deficits remain well below levels seen in the 1980s as a percentage of the size of the economy.
"The administration's plan to cut the deficit in half is a combination of strong economic growth and spending restraint. The economy appears to be picking up steam and now we should focus on keeping spending in check," said Trent Duffy, spokesman for the White House Office of Management and Budget.
The CBO forecasts that economic growth will accelerate considerably next year, with real GDP (news - web sites) rising at a rate of 3.8 percent in 2004, up from 2.2 percent in 2003.
Unusually, however, it also forecasts that unemployment will nevertheless remain high, averaging 6.2 percent both this year and the next, in another potential pitfall for Bush in the 2004 presidential election.
Under the agency's latest predictions, the size of the government's budget deficit would peak in 2004 and slowly decline thereafter, giving way to small surpluses from 2012.
But it also noted that the forecast does not include many likely future costs that would greatly alter that picture.
For example, making permanent most of Bush's tax cuts -- which Republicans have vowed to do -- would add almost $1.6 trillion to the deficit over the next decade.
Also excluded are the $400 billion Congress wants to spend over that period to overhaul Medicare and even a modest reform of the ever-expanding reach of the Alternative Minimum Tax, which would cost a further $400 billion.
Where's Bill Clinton When we need Him.