White House Projects Deficit Near $300 Billion

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New projections for the federal deficit show that the amount of money the government will spend this fiscal year is about $300 billion more than it will take in. That's better than the $400 billion the White House predicted six months ago. President Bush immediately took credit for the improvement, but some Democrats question his math.

RENEE MONTAGNE, host:

The White House announced yesterday that this year's federal deficit will be below $300 billion. That's more than $125 billion lower than predicted, and with that, the Washington spin machines got cranking.

President Bush claimed credit. Democrats accused the White House of fudging their numbers. NPR White House Correspondent David Greene reports.

DAVID GREENE reporting:

At every opportunity, President Bush likes to talk about his pledge to cut the annual budget deficit in half. But half of what?

Spokesman Tony Snow says the President is using a number from a few years ago as his baseline.

Mr. TONY SNOW (White House Press Secretary): That was back in February of 2004, when there was a projected $521 billion deficit, and so we're looking at the halfway point of that.

GREENE: Notice, Snow said projected $521 billion deficit. The actual deficit for 2004 was more than $100 billion lower. Still, President Bush came in to the East Room yesterday determined to announce that he's approaching his goal.

President GEORGE W. BUSH: Here's some hard numbers. Our original projection for this year's budget deficit was $423 billion. That was our projection; that's what we thought was going to happen. That's what we sent up to the Congress, here's what we think. Today's report from OMB tells us that this year's deficit will actually in at about $296 billion.

(Soundbite of applause)

GREENE: The President kept piling on the apparent good news.

President BUSH: I said we could cut the federal deficit in half by 2008 or 2009. We're now a full year ahead of schedule.

GREENE: Eugene Steuerle, who worked in the Treasury Department under President Ronald Reagan and is now a senior fellow at The Urban Institute in Washington, said Mr. Bush was probably doing a bit too much celebrating.

Mr. EUGENE STEUERLE (Senior Fellow, Urban Institute): There's the data, and then there's the spin of the data. It's very hard in any one-year change in the economy to make very broad claims one way or the other.

GREENE: STEUERLE said, yes, higher than expected tax revenues are bringing down the deficit this year. But to focus too much on that, he said, may be to ignore larger challenges, like paying for costly entitlement programs and reforming the tax code.

Mr. STEUERLE: It's nice that receipts are up a little bit right now; that's going to give us a tiny bit of a reprieve. Hopefully, it's not a reprieve that's just going to forestall the day when we deal with our much more serious problems.

GREENE: And he didn't blame just the president. Both parties, he said, have year after year ducked the nation's biggest economic challenges.

Democrats yesterday went into hyper drive after Mr. Bush's speech. It took 20 minutes for Democrat Senator John Kerry's office to fire off a statement to reporters. The president, Kerry said, shouldn't be happy simply because record deficits are not quite as high as his own budget office had guessed.

Democratic Senator Kent Conrad, of North Dakota, took his criticism even further.

Senator KENT CONRAD (Democrat, North Dakota): You know, earlier this year, when they came up with this deficit forecast, I said at the time in this very setting, I don't believe these deficit forecasts. I think they overestimated the deficit on the front end to claim success later on in the year. And guess what? That's exactly what they're doing now.

GREENE: White House Spokesman Tony Snow dismissed as insane the idea that the White House would adjust its estimate in this way. But such accusations are nothing new to Washington. Back before he was president, Mr. Bush had this to say about his presidential rival, Al Gore.

(Soundbite of campaign speech, 2000 presidential election)

President BUSH: This is a man who's got great numbers. He talks about numbers. I'm beginning to think not only did he invent the Internet, but he invented the calculator. It's fuzzy math.

GREENE: That was in the year 2000. And, by the way, the year when President Bush now says the deficit will be cut in half is 2008, his last in office.

David Greene, NPR News, the White House.

(Soundbite of music)

MONTAGNE: This is NPR News.

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White House Drops Deficit Projection to $296 Billion

 The latest figures for the budget deficit are revised to $296 billion for 2006 instead of the $423

The latest figures for the budget deficit are revised to $296 billion for 2006 instead of the $423 billion that the administration had projected in February. Source: Office of Management and Budget. Doug Beach hide caption

itoggle caption Doug Beach
The White House increased its estimates for individual and corporate tax receipts from the projectio

The White House increased its estimates for individual and corporate tax receipts from the projections made earlier this year. The president said Tuesday that economic growth fueled by tax relief has sent tax revenues soaring. Doug Beach hide caption

itoggle caption Doug Beach

(AP) — President Bush touted new deficit figures Tuesday showing considerable improvement upon earlier administration predictions, saying it shows the wisdom of his tax cuts.

Bush himself announced the figures - a task that for the most part has been left to lower-ranking administration officials in the past. The new figures show the deficit for the budget year ending Sept. 30 will be $296 billion - much better than the $423 billion that Bush predicted in February and a slight improvement over 2005.

Bush said the improvement is due to tax cuts he pushed in 2001 and 2003 and his clampdown on domestic agencies funded by Congress.

"These tax cuts left nearly $1.1 trillion in the hands of American workers and families and small business owners. And they used this money to help fuel an economic resurgence that's now in its 18th quarter," Bush said. "Economic growth fueled by tax relief has sent our tax revenues soaring."

Impressive profits and big income gains by the wealthy are largely responsible for the surge in revenues and, in turn, the deficit drop.

However, the results are less impressive when compared to the $318 billion deficit posted last fall for fiscal 2005. Despite strong revenues, the high costs of the Iraq war and Gulf Coast hurricane relief have weighed on the deficit - as have higher interest payments paid on the national debt.

The deficit for next year would ease back up to $339 billion, the White House predicted. It would drop to $188 billion in 2008.

"The 2006 deficit may be a bit lower, but it represents a $600 billion swing from the surplus projected in 2001. And a deficit of $296 billion is still a large deficit. In nominal terms, its one of the four largest in history," said Rep. John Spratt Jr. of South Carolina, top Democrat on the Budget Committee.

"Let's not boast about a $300 billion deficit," said Senate Minority Leader Harry Reid (D-NV). "Any statistic you look at recognizes the rich in America are getting richer, the poor are getting poorer and the middle class is getting squeezed."

Revenues are running $115 billion greater than expected earlier this year, the White House said, reflecting particularly strong growth in taxes paid on corporate profits and income taxes paid by wealthier people and small businessmen who pay taxes quarterly instead of having them withheld by employers.

Taxes paid by individuals are growing at an 11 percent rate, the White House says, while corporate taxes are rising at a 19 percent rate.

"Bold pro-growth tax policies enacted by Congress and the president have sparked unprecedented economic growth," said Senate Budget Committee Chairman Judd Gregg (R-NH).

But Gregg and budget experts across the spectrum say the real challenge lies ahead, when the retirement of the baby boomers threatens to swamp Social Security and the Medicare health plan for the aged.

For his part, Bush reiterated that Congress should enact the line-item veto to help him crack down on wasteful spending passed by Congress.

The economy is estimated to grow at a 3.5 percent rate in real terms, a slight slowdown from the 5.6 percent rate of the first quarter of the year.

"We've had extraordinarily good profit growth, and when you have better profit growth than wage growth you tend to have windfall tax revenues because taxes on profits are higher than taxes on wages," said Diane Swonk, chief economist for Mesirow Financial, a Chicago-based financial services firm.

Swonk predicted that the unexpected revenue surge would ease around the end of the year as profits peak.

Bush has had few opportunities to boast about the deficit over the course of his time in office. He inherited in 2001 a surplus estimated by both White House and congressional forecasters at $5.6 trillion over the subsequent decade, and it quickly dwindled.

Those faulty estimates assumed the late-1990s revenue boom - fueled by the stock market and dot.com booms - would continue. But that bubble burst, and a recession and the Sept. 11, 2001, terrorist attacks started a flow of red ink. Several rounds of tax cuts, including Bush's signature $1.35 trillion tax cut in 2001, also contributed to the return to deficits four years ago after four years of budget surpluses.

Some budget experts say the steep rise in tax receipts looks more impressive than it really is since revenues are bouncing back from a three-year decline during Bush's first term, drops not seen since the Great Depression.

"The current so-called revenue surge is merely restoring revenues to where they were half a decade ago," said Robert Greenstein, executive director of the liberal-leaning Center on Budget and Policy Priorities think tank. That's after accounting for inflation and population growth.

Still, the new figures allowed Bush to claim that he will meet his promise, made in early 2004, that he will cut the deficit in half by the end of his second term. Bush's deficit-halving promise was based on 2004 estimates projecting a $521 billion deficit for the 2004 budget year, setting the goal of $260 billion.

Copyright 2006 by The Associated Press. All Rights Reserved.

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