Despite Tax Bump, Deficit an Election Target
MELISSA BLOCK, host:
There was good some news from the U.S. government today on the fiscal front. The federal budget deficit is now expected to run slightly less than $300 billion for the current fiscal year. That number is lower than projected, due largely to tax revenues that came in higher than anticipated. Republicans credit their tax cuts, which they say stimulated the economy. Democrats counter by saying the long-term outlook remains gloomy. NPR's Brian Naylor reports.
BRIAN NAYLOR reporting:
The Bush administration and Congressional Republicans have felt they weren't getting credit for an economy that's registered steady, if modest, growth and monthly job gains. So today they pounced on the word that the deficit for this fiscal year is now projected at $296 billion, well below the $423 billion projected just last February.
The president himself made the announcement to a White House audience packed with GOP members of Congress.
President GEORGE W. BUSH: This economy's growing, federal taxes are rising, and we're cutting the federal deficit faster than we expected. This good news is no accident. It's the result of the hard work of the American people and sound policies in Washington, D.C.
NAYLOR: Those policies, say Republican officials, include the tax cuts the President and GOP lawmakers pushed through Congress in 2001 and 2003, along with regulatory reform and opening new markets. Republican Senator Jim DeMint of South Carolina said they should be continued.
Senator JIM DEMINT (Republican, South Carolina): This mid-season review offers yet more proof that the Republican agenda to secure American jobs and balance the budget is working. We're making progress. It's third down and time for us to run the ball for a touchdown, not punt it away.
NAYLOR: Analysts say the lower-than-anticipated deficit is due largely to stronger collections from the wealthy and increased corporate profits. According to the White House, taxes paid by individuals are expected to grow by 15 percent - corporate taxes by 19 percent. That's offsetting some of the increases in government spending brought on by the war in Iraq and Hurricane Katrina.
But Democrats say this is hardly cause for celebration. They say the administration overstated early deficit projections just five months ago to make this summer's numbers look good by comparison. Senate Minority Leader Harry Reid says this year's deficit - the fourth largest on record - is hardly good news.
Senator HARRY REID (Democrat, Nevada; Senate Minority Leader): Please, let's not boast about a $300 billion deficit. Any statistic you look at recognizes the rich in America are getting richer, the poor are getting poorer, and the middle class is being squeezed.
NAYLOR: President Bush says with the new figures, the deficit is now on track to be cut in half by fiscal 2008, a year ahead of his schedule. But that's only if spending on the war is dramatically reduced, and soon - which looks unlikely. In any event, the deficit is expected to spike upward in the years after Mr. Bush leaves office, as the baby boomers begin retiring in larger numbers and collecting Social Security and Medicare benefits. North Dakota Democrat Kent Conrad, the senior Democrat on the Senate Budget Committee, says this is not the time to be rejoicing.
Senator KENT CONRAD (Democrat, North Dakota; Senior Democrat, Senate Budget Committee): All of this happy talk coming out of the administration about the fiscal circumstance, it reminds me a little of somebody holding a press conference to talk about the new lifeboats on board the Titanic.
NAYLOR: Democrats also note that the Bush administration inherited a budget surplus from the Clinton White House, only to see that reversed as the stock market declined, the economy went into recession, and the country shifted to war footing after the 9-11 attacks.
Both sides agree that reforming entitlements like Social Security and Medicare is essential to keeping future deficits from exploding. But for now, they're nowhere near consensus about how to do that. Brian Naylor, NPR News, the Capitol.
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