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July 30, 2004
Record Deficit of $445 Billion Projected for This Fiscal Year
By DAVID E. ROSENBAUM
WASHINGTON, July 30 — The White House projected today that the budget deficit would reach $445 billion in this fiscal year, by far the largest shortfall ever but well below the amount forecast six months ago.
Joshua B. Bolten, President Bush's budget director, presented the new forecast as good news, saying "the improved budget outlook is the direct result of the strong economic growth the president's tax relief has fueled."
As a percentage of the national economy, Mr. Bolten said, the amount was far lower than the record.
But Democrats said the revised forecast for fiscal year 2004, still almost 20 percent higher than the record $375 billion deficit in the last fiscal year, showed just how much the government's fiscal health had deteriorated under Mr. Bush's stewardship.
"They're claiming improvement?" said Senator Kent Conrad of North Dakota, the top Democrat on the Senate Budget Committee. "That is utterly preposterous."
In fiscal 2001, the last time the budget was prepared by the Clinton administration, it showed a surplus of $127 billion. Soon after President Bush took office in January 2001, his staff projected a 2004 surplus of $262 billion. Representative John M. Spratt Jr., the ranking Democrat on the House Budget Committee, said that meant that by the administration's own calculations, the budget picture had worsened by nearly $400 billion in just three years.
In early February, the White House predicted that the deficit in this fiscal year would be $521 billion. The lower number announced today in what is called the mid-session review resulted from larger tax receipts than had been expected. Mr. Bolten said that was the consequence of "the broad-based and sustained economic recovery."
The administration is predicting that the economy in this calendar year will grow by 4.7 percent, slightly more than the 4.5 percent growth that is the average projection of the leading private economic forecasters.
The government's announcement today that the economy had grown at an annual rate of only 3 percent in the second quarter of this year, after growth of 4.5 percent in the first quarter, could make the White House's expectation for the year hard to meet. To reach it, the economy would have to grow by more than 5.6 percent in the last six months of the year.
Mr. Bolten discounted the importance of the second quarter numbers and said the budget was still on track to meet Mr. Bush's goal of cutting the deficit to less than half of what was projected in February for this fiscal year by the end of his second term in office, while extending the tax cuts enacted in his first term.
The White House sees the deficit falling to $331 billion in the 2005 fiscal year, which begins Oct. 1, and dropping steadily year by year until it is $229 billion in fiscal year 2009, when the next presidential term ends. These deficits are somewhat lower than were forecast in February.
The calculations do not include any additional spending in Iraq and Afghanistan after early next year, when current appropriations will run out.
"We will need additional money," Mr. Bolten said, but he said it would not be enough to jeopardize the objective of reducing the deficit by half.
Senator John Kerry, the Democratic presidential nominee, also promises to cut the deficit in half in four years. But he says he would repeal the tax cuts for people with incomes above $200,000 a year and spend the additional revenue, mainly for an expensive plan to expand health insurance coverage.
Mr. Bolten acknowledged that "today's deficits remain unwelcome," but he said the situation was not serious. "The most relevant perspective on the deficit is in relation to the size of the nation's economy," he said, and the figure projected today is 3.8 percent of the gross domestic product, "well within historical range" and much lower than the record 6 percent reached in 1983.
Mr. Spratt challenged that, too. He said that if the surplus in the Social Security trust fund was discounted, the deficit would be over $600 billion in this fiscal year, 5.2 percent of the economy, "up there with some of the biggest deficits of all time."
Mr. Bolten attributed the worsened government balance sheet to "an extraordinary confluence of adversity: the stock market downturn that began in 2000, and the subsequent recession that the president inherited as he took office; the terrorist attacks on America, and subsequent spending for homeland security and the war on terror; and the crisis in confidence produced by corporate scandals years in the making."
He did not mention the effects of the tax cuts enacted in Mr. Bush's first three years. The nonpartisan Congressional Budget Office has calculated that about half of the budget turnaround was caused by the weaker economy, about a quarter by higher spending and about a quarter by lower revenues because of the tax reductions.
In September, the budget office, which uses a different method of calculation, will publish its own revised deficit forecast for the fiscal year. The director of the office, Douglas Hotlz-Eakin, has said that the new forecast would be lower than $450 billion, compared with a projection in January of $477 billion.
Although the deadline is often missed, the mid-session review is supposed to be completed by July 15 under the budget law.
Democrats accused the White House of stalling so the new numbers would not be ammunition for the Democratic attack during the party's convention this week. Mr. Bolten said the delay was necessary to make sure the numbers were accurate.
Record Deficit of $445 Billion Projected for This Fiscal Year
By DAVID E. ROSENBAUM
WASHINGTON, July 30 — The White House projected today that the budget deficit would reach $445 billion in this fiscal year, by far the largest shortfall ever but well below the amount forecast six months ago.
Joshua B. Bolten, President Bush's budget director, presented the new forecast as good news, saying "the improved budget outlook is the direct result of the strong economic growth the president's tax relief has fueled."
As a percentage of the national economy, Mr. Bolten said, the amount was far lower than the record.
But Democrats said the revised forecast for fiscal year 2004, still almost 20 percent higher than the record $375 billion deficit in the last fiscal year, showed just how much the government's fiscal health had deteriorated under Mr. Bush's stewardship.
"They're claiming improvement?" said Senator Kent Conrad of North Dakota, the top Democrat on the Senate Budget Committee. "That is utterly preposterous."
In fiscal 2001, the last time the budget was prepared by the Clinton administration, it showed a surplus of $127 billion. Soon after President Bush took office in January 2001, his staff projected a 2004 surplus of $262 billion. Representative John M. Spratt Jr., the ranking Democrat on the House Budget Committee, said that meant that by the administration's own calculations, the budget picture had worsened by nearly $400 billion in just three years.
In early February, the White House predicted that the deficit in this fiscal year would be $521 billion. The lower number announced today in what is called the mid-session review resulted from larger tax receipts than had been expected. Mr. Bolten said that was the consequence of "the broad-based and sustained economic recovery."
The administration is predicting that the economy in this calendar year will grow by 4.7 percent, slightly more than the 4.5 percent growth that is the average projection of the leading private economic forecasters.
The government's announcement today that the economy had grown at an annual rate of only 3 percent in the second quarter of this year, after growth of 4.5 percent in the first quarter, could make the White House's expectation for the year hard to meet. To reach it, the economy would have to grow by more than 5.6 percent in the last six months of the year.
Mr. Bolten discounted the importance of the second quarter numbers and said the budget was still on track to meet Mr. Bush's goal of cutting the deficit to less than half of what was projected in February for this fiscal year by the end of his second term in office, while extending the tax cuts enacted in his first term.
The White House sees the deficit falling to $331 billion in the 2005 fiscal year, which begins Oct. 1, and dropping steadily year by year until it is $229 billion in fiscal year 2009, when the next presidential term ends. These deficits are somewhat lower than were forecast in February.
The calculations do not include any additional spending in Iraq and Afghanistan after early next year, when current appropriations will run out.
"We will need additional money," Mr. Bolten said, but he said it would not be enough to jeopardize the objective of reducing the deficit by half.
Senator John Kerry, the Democratic presidential nominee, also promises to cut the deficit in half in four years. But he says he would repeal the tax cuts for people with incomes above $200,000 a year and spend the additional revenue, mainly for an expensive plan to expand health insurance coverage.
Mr. Bolten acknowledged that "today's deficits remain unwelcome," but he said the situation was not serious. "The most relevant perspective on the deficit is in relation to the size of the nation's economy," he said, and the figure projected today is 3.8 percent of the gross domestic product, "well within historical range" and much lower than the record 6 percent reached in 1983.
Mr. Spratt challenged that, too. He said that if the surplus in the Social Security trust fund was discounted, the deficit would be over $600 billion in this fiscal year, 5.2 percent of the economy, "up there with some of the biggest deficits of all time."
Mr. Bolten attributed the worsened government balance sheet to "an extraordinary confluence of adversity: the stock market downturn that began in 2000, and the subsequent recession that the president inherited as he took office; the terrorist attacks on America, and subsequent spending for homeland security and the war on terror; and the crisis in confidence produced by corporate scandals years in the making."
He did not mention the effects of the tax cuts enacted in Mr. Bush's first three years. The nonpartisan Congressional Budget Office has calculated that about half of the budget turnaround was caused by the weaker economy, about a quarter by higher spending and about a quarter by lower revenues because of the tax reductions.
In September, the budget office, which uses a different method of calculation, will publish its own revised deficit forecast for the fiscal year. The director of the office, Douglas Hotlz-Eakin, has said that the new forecast would be lower than $450 billion, compared with a projection in January of $477 billion.
Although the deadline is often missed, the mid-session review is supposed to be completed by July 15 under the budget law.
Democrats accused the White House of stalling so the new numbers would not be ammunition for the Democratic attack during the party's convention this week. Mr. Bolten said the delay was necessary to make sure the numbers were accurate.
