Deficit Expected To Reach $337B

The federal budget deficit will reach at least $337 billion for the current year, the Congressional Budget Office estimates, and the deficit is likely to go higher because of tax cuts and new additional spending for hurricane relief and the war in Iraq.

The deficit estimated by the nonpartisan CBO was lower than predicted by the White House budget office, which two weeks ago said the 2006 deficit would top $400 billion because of emergency aid for victims of hurricanes Katrina and Rita.

CBO's estimate was to be officially released at 10 a.m. But the overall figures were provided to The Associated Press by a congressional aide, who acted on condition of anonymity because the numbers had not been officially released by the budget office.

Deficits for 2006-10 will total $1.3 trillion, CBO predicts, but such "baseline" figures may prove inaccurate because of the rules the scorekeeping agency has to follow when producing its estimates. For instance, the agency does not account for upcoming Bush administration requests for the war in Iraq or additional hurricane relief, which promise to add tens of billions to the 2006 deficit.

Over a longer term, from 2006-15, CBO predicts a $1.2 trillion deficit, but that presumes President Bush's signature 2001 and 2003 tax cut bills are allowed to expire at the end of this decade.

The government recorded a $319 billion deficit for 2005. The record deficit in dollar terms of $412 billion was registered in fiscal 2004.

Economists say the more significant measure is against the size of the economy. In those terms, CBO's 2006 deficit prediction would equal 2.6 percent of gross domestic product and would be significantly better than deficits witnessed in the mid-1980s and early 1990s. Then, deficits of 4 percent to 6 percent of GDP were common.

A deficit of $400 billion would represent about 3 percent of GDP.

The White House will submit its 2007 budget on Feb. 6. With near-term deficit predictions going up, Republicans in Congress are feeling political heat from their core political supporters, who say the party's record on fiscal discipline is slipping.

Republicans are particularly upset about the proliferation of lawmakers' pet projects under GOP control of Congress. For instance, total spending on such "earmarks" hit $17 billion in the fiscal 2006 round of congressional appropriations bills, according to a House Appropriations Committee tally.

Indeed, the deficit picture remains far worse than when Bush took office in 2001, when both White House and congressional forecasters projected cumulative surpluses of $5.6 trillion over the subsequent decade. Then, the White House forecast a surplus for this year of $269 billion.

Those faulty estimates assumed the revenue boom fueled by the surging stock market and Internet-fueled worker productivity gains would continue. But that bubble burst, and a recession and the Sept. 11, 2001, terrorist assaults adversely affected the books. Several rounds of tax cuts, including Bush's signature $1.35 trillion 2001 tax cut, also contributed to the return to deficits in 2002 after four years of budget surpluses.

Now, the White House is citing the government's response to Hurricane Katrina as the principal reason for the worsening deficit picture. Some $62.5 billion in emergency appropriations and another $13.9 billion in tax relief are the main elements of hurricane aid already totaling $99 billion over five years.

In early 2004, Bush said his goal was to cut the deficit in half in five years. Then, the White House forecast the deficit to be $521 billion for the 2004 budget year, setting the goal of $260 billion by 2009.