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White House Predicts 2004 Deficit Of $445 Billion - the Biggest Ever
By Dana Milbank Washington Post Staff Writer The White House forecast yesterday that the U.S. budget deficit for this
year will be a highest-ever $445 billion, lower than the administration
previously predicted but nearly 20 percent larger than last year's record
shortfall. President Bush's budget director, while calling the figure "unwelcome,"
said the new forecast for fiscal 2004 - in line with recent congressional
forecasts - provides evidence that the economy is growing and tax receipts
are recovering. The message echoed a new refrain in Bush's campaign speeches,
voiced repeatedly yesterday in Missouri: "We're turning the corner,
and we're not turning back." But Democrats - and the campaign of presidential nominee John F. Kerry
- countered that the new estimate looks good only in comparison with a
previous estimate of $521 billion that was unrealistically high. They
noted that the deficit is still on pace to be $70 billion higher than
last year's $375 billion. In addition, the Labor Department announced yesterday that from the start
of 2001 to the end of 2003, 11.4 million workers were displaced from jobs
- 5.3 million of them from jobs they had held for three or more years.
Though two-thirds of the 5.3 million found new jobs, 57 percent of those
who did find work earned less than they had previously. Still, the White House declared a qualified victory. "The deficit
remains at a level that we think is unwelcome," said Joshua B. Bolten,
director of the Office of Management and Budget. "The good news is
that it is much lower than we projected, and we or any of the other forecasters
projected just six months ago, and we believe that that is a product of
the strong economic policies that the president has put in place, and
that the trend will continue." Bolten said the government is ahead of pace to fulfill Bush's vow that
the deficit would be cut in half over five years. But he said that the
target for the reduction will be based not on an actual deficit but on
the earlier, overstated deficit forecast for 2004. He also said the predicted
reduction will be based not on actual dollars but on the deficit as a
percentage of gross domestic product. The deficit for fiscal 2004, which
ends Sept. 30, will be 3.8 percent of the gross domestic product, Bolten
said, well below the modern high of 6 percent, in 1983. The White House projected a deficit of $331 billion for fiscal 2005,
which begins Oct. 1. But Bolten said declining deficit projections for
the next four years do not include additional emergency spending, which
is expected to reach tens of billions of dollars. "You need to factor
in that we will need additional spending, at least in the short term,
in both Iraq and Afghanistan," he said. Democrats ridiculed the White House's upbeat portrayal of the statistics.
"The administration announces the largest deficit in the history
of the United States and they claim things are getting better. That is
a remarkable claim," said Sen. Kent Conrad (N.D.), the ranking Democrat
on the Senate Budget Committee. "It's a little like the captain of
the Titanic saying there's good news as the ship goes down, because it's
not sinking as fast as he'd said it would." Kerry's campaign said that even the reduced deficit forecast for 2004
is $800 billion worse than what the Congressional Budget Office had forecast
in 2001 for this year - including the loss of an expected surplus. Bolten
said the deficits came from "an extraordinary confluence of adversity,"
including the terrorist attacks and corporate scandals. He did not cite
tax cuts as a cause. The White House did not offer forecasts going beyond five years. The
Committee for a Responsible Federal Budget said "the problems only
get worse" after that point, when increasing numbers of baby boomers
will retire and become eligible for Social Security and Medicare. The White House report released yesterday increased the cost projections
for the Medicare and Social Security programs, raising the Medicare cost
by $67 billion and the Social Security cost by $59 billion over five years. The report marked just the beginning of election-year budget sparring.
The budget director said that the federal government will reach its debt
ceiling in early October, which means Congress will be called upon to
raise the debt limit in the weeks before the elections. Bolten said Bush
expects to ask Congress for additional money for Iraq early next year,
which would avoid a pre-election showdown. Despite yesterday's report on slower economic growth, the administration
also raised its overall growth forecast for the year to 4.7 percent from
an earlier forecast of 4.4 percent. Growth in 2005 was put at 3.7 percent.
© 2004 The Washington Post Company
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