Budget Deficit Drops Again

New CBO Forecast Shows This Year's Deficit Down To $331 Billion

(AP)  The federal budget-deficit picture turned brighter Monday as congressional scorekeepers released new estimates showing the level of red ink for the current fiscal year would drop to $331 billion.

The new report by the nonpartisan Congressional Budget Office, which does budget analysis for lawmakers in Washington, gave the latest proof that surging revenues and a steadily growing economy are combining to bring the deficit down from a record $412 billion posted last year. CBO predicts a $314 billion deficit for the budget year starting Oct. 1.

The report is welcome news for President Bush, who has seen the budget situation during his tenure deteriorate markedly from predictions of unending surpluses when he took office in January 2001.

"The CBO report confirms the dramatic improvement in the 2005 deficit picture that the administration reported last month," said Scott Milburn a spokesman for the White House budget office. "A strong economy fueled by tax relief is generating stronger-than-projected revenues."

The White House foresees a $333 billion deficit for the year that's about to end and a $341 billion deficit for next year.

Last year's deficit was a record in dollar terms, though many previous deficits in the mid-1980s and early 1990s were larger when measured against the size of the economy. The White House and most economists say that the more relevant measure of the deficit is to weigh it against the size of the economy. Measured that way, the latest estimates for this year are slightly worse than recent historic averages.

But Democrats on Capitol Hill were quick to issue warnings about the long-term deficit picture, which will worsen considerably after the Baby Boom generation starts retiring in large numbers after the turn of the decade.

"While this year's deficit will be lower than last year's record shortfall, the improvement is likely to be short-lived. Declarations of victory over budget deficits only distract from the disturbing long-term budget outlook," said Kent Conrad of North Dakota, top Democrat on the Senate Budget Committee.