W. House Forecasts Record Budget Deficit
WASHINGTON (Reuters) - The U.S. budget deficit will hit a record $445 billion this year, according to a White House report on Friday that is sure to fuel election-year wrangles about President Bush's economic policies.
The figure is well above the 2003 shortfall of $374 billion, the prior record in dollar terms. But the mid-session review forecast is $76 billion less than the $521 billion the White House projected in February.
The White House said the more modest deficit forecast was a sign Bush's tax-cutting policies were spurring economic growth. But Democrats seized on the rise in red ink over last year to accuse Bush of fiscal recklessness.
"Because the president's economic policies are working, we are ahead of pace to meet the goal of cutting the deficit in half within five years," said White House budget director Joshua Bolten.
Sen. Kent Conrad of North Dakota, the top Democrat on the Senate budget committee blamed Bush's tax cuts for the shortfall.
"In an effort to distract attention from its record of fiscal irresponsibility, the Bush administration is trying to invent some good news by claiming that its mid-session review shows that the deficit is coming down," Conrad said.
The White House blames the 2001 recession and the aftermath of the Sept. 11 attacks for ushering in the deficits.
The White House also raised its projections for the economy, to 4.7 percent for this year, after its earlier forecast of 4.4 percent. The more optimistic outlook came despite a report earlier in the day showing the economy grew 3 percent in the second quarter down from 4.5 percent in the first three months of the year.
Although the budget gap hit an all-time high in dollar terms, Bolten emphasized that as a percentage of the size of the economy it was only 3.8 percent. The record in these terms was set in 1983 when the deficit reached $208 billion, or 6 percent of gross domestic product.
The White House projected a deficit of $331 billion for fiscal year 2005, which begins Oct. 1. But that figure does not include tens of billions of dollars that will be needed to fund military operations and reconstruction in Iraq.
Congress has approved a $25 billion emergency fund for Iraq but Bolten said the White House does not anticipate dipping into that before Oct. 1 even though it has leeway to do so.
However, early next year the administration plans to ask for more money for Iraq. Bolten did not say how much but some Democrats speculate it will be a further $50 billion.
The $445 billion deficit estimate for this year is higher than the $420 billion figure many in Congress had been bracing for over the last week.
The nonpartisan Congressional Budget Office is expecting a shortfall of less than $450 billion for the fiscal year.
Although robust economic growth has bolstered the government's coffers, two key programs, Social Security and Medicare, had higher than expected costs.
The deficit figure was released a day after Massachusetts Sen. John Kerry formally accepted his party's nomination to challenge Bush in the Nov. 2 election, promising to roll back the tax cuts for wealthiest Americans.
Conservative Republicans want Bush to make an overhaul of Social Security a key campaign theme. But some Republicans said the anticipated large cost may weigh against giving it heavy emphasis in the campaign.
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