Federal Deficit Heads Toward Record High
MELISSA BLOCK, host:
Nearly half-a-trillion dollars. That's the projected budget deficit for fiscal year 2009, announced today by the Bush administration. That's an all-time high, and about $75 billion more than previously estimated. Today, White House press secretary Dana Perino said it was no secret the deficit would worsen.
Ms. DANA PERINO (White House Press Secretary): We believe these deficits are temporary and manageable if we keep spending in check, the tax burden low, and the economy growing.
BLOCK: Those are some significant ifs. The Budget Office also said today that GDP would grow by 1.6 percent this year. That's lower than previous projections. Reporter Richard Wolf is here in the studio to go through the numbers and what they mean. He covers budget issues and the White House for USA Today. Thanks for coming in.
Mr. RICHARD WOLF (USA Today): Thank you for having me.
BLOCK: This number, $482 billion for the deficit for fiscal year 2009, how did the advisors explain why it's higher than they thought it would be?
Mr. WOLF: Well, it's almost all completely due to the economy. Half of it is on the receipt side, what money is coming in, and that's less than they had anticipated, and half of it is on the spending side, what money they're sending out, and the reason they're sending it out, again, is to try to recover from the economic slowdown. It's money that's going out the door for unemployment benefits; it's money that's going out the door in the form of tax rebates passed by Congress earlier this year.
That was seen as a 150 roughly billion dollar package for 2008, but some of those costs are being carried over into 2009, and then in addition to that, it's just the impact of the economic slowdown on receipts. Corporate taxes, other forms of taxes, are estimated to come in a little bit slower than they otherwise would have.
BLOCK: Does this number take into account the cost of the wars in Iraq and Afghanistan?
Mr. WOLF: Well, it takes into account about $70 billion, which is what they called a bridge fund that they were putting in to get into the next administration, and that's a little more honest than the budgeting they used to do several years ago, when they would put in nothing. So it has some money for the 2009 fiscal year for the wars but not enough. We've been spending somewhere between, say, $150 billion and $200 billion a year on the wars. So if you do the math, you'd probably need another $100 billion or so, maybe a little bit less than that, to get through the rest of the fiscal year.
BLOCK: Economists say that the most relevant number to look at with the budget deficit is to look at it as a percentage of GDP. How would this number for 2009 compare with past years, if you look at it that way?
Mr. WOLF: It's not so bad, when you take into consideration the size of the economy. This deficit of 482 billion in 2009 would be 3.3 percent of GDP. The current year's $389 billion deficit would be 2.7 percent. OMB and the Bush administration say that's generally within historical averages. It's a little bit higher than the average, but it's much less than the 6 percent of GDP record of 1983 during the Reagan administration.
BLOCK: Regardless, this is the number, likely, the next president will be facing when he takes office. Are Barack Obama or John McCain, are they talking about the deficit and what they'd do about it?
Mr. WOLF: Well, they're talking about tax cuts, which will make the deficit worse to some degree. They're not talking nearly as much about spending cuts, which is what's going to be necessary.
There are those who believe the tax cuts ultimately help the deficit in a dynamic scoring sort of way. The Bush administration certainly believes that, and there were a number of years recently where the deficit did come down for the Bush administration, from 413 billion down to about 162 billion. They would argue that the tax cuts that they enacted in 2001 and 2003 had something to do with that by spurring the economy.
John McCain and Barack Obama are both talking about tax cuts, different types of tax cuts. The Tax Policy Center, which is a nonpartisan outfit run by Urban Institute and Brookings Institution, say that either one of those tax-cut plans would increase the deficit even more.
BLOCK: It's interesting, too, if you look at what the Budget Office was saying today from the White House, they're projecting a surplus again by 2012. How did they get there?
Mr. WOLF: Not easily, and Jim Nussle, the budget director, acknowledged that that wouldn't be easy. It's mostly a hope. They always intended on saying that by 2012, they'd be in balance. I don't think any degree of bad news on the 2008 or 2009 deficit projections in this report was going to stop them from saying that by 2012, they'd be back in balance, but Jim Nussle today said that any number of things could cause that not to happen, and he sort of turned the tables on Congress and said anything more that they spend or any tax increases that they enact, which the Bush administration thinks would have a bad effect on the economy, could make things worse and could make that 2012 surplus unattainable.
BLOCK: Okay, stay tuned on that. Richard Wolf, thanks again.
Mr. WOLF: Thanks for having me.
BLOCK: That's Rich Wolf of USA Today.