Congress predicts record budget deficit
WASHINGTON — The Congressional Budget Office projected Tuesday that this election-year’s federal deficit will hit a record $422 billion, a shortfall that would be smaller than analysts predicted earlier this year.
The figure immediately provided political fodder for both parties now in the final two-month stretch of the presidential and congressional campaigns.
“There is no way to portray a record deficit as good news,” said Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee. “From any perspective, today’s deficit numbers are a cause for alarm and a call to action.”
“Deficits are going down, jobs are going up, the economy continues to improve,” said Sean Spicer, Republican spokesman for the House Budget panel. “I don’t see how you can’t be happy with that news.”
The projection by Congress’ nonpartisan budget analysts would surpass last year’s $375 billion shortfall, the current record.
Tuesday’s figures don’t include costly steps that many expect lawmakers to take that would swell the red ink further. These include making tax cuts that Bush has won permanent, and easing the gradually growing impact on middle-class taxpayers of the alternative minimum tax, which was initially aimed at the wealthy.
The CBO report said next year’s deficit would shrink to $348 billion, which would be the third largest ever in dollar terms. That would be $15 billion less than it projected last March, but $17 billion higher than the White House estimated in July.
While the congressional analysts improved their short-term budget projections, their long-term forecast has worsened since last March.
Over the 10 years ending in 2014, the analysts now envision deficits totaling nearly $2.3 trillion — almost $300 billion worse than they projected in March.
The increase is largely due to an assumption that extra spending enacted this year for Iraq, Afghanistan and overall defense needs will be continued annually over the next decade. The validity of that assumption is likely to be grounds for more partisan battling.
Though the budget office sees a healthy economy over the next two years, the report warned that the approaching retirement of the baby boom generation means that serious problems loom with growing pressure on Social Security, Medicare and Medicaid.
When adjusted to erase the effects of inflation, the projected $422 billion deficit projected for 2004 would exceed the value of every annual shortfall since World War II.
Tuesday’s CBO estimate should prove fairly accurate because the federal budget year, which runs through Sept. 30, has less than one month to go. But it does not include the $2 billion in aid for repairing hurricane damage in Florida.