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Deficit Picture Brightens

Federal budget deficit
AP
Surging revenues and a steady economy have led the White House to project that this year's federal budget deficit will drop to $333 billion, nearly $100 billion below earlier estimates.

The White House welcomed the developments, calling the improving deficit picture a vindication of President Bush's stewardship of the economy and budget.

"The nation's budget picture has improved dramatically," said the new White House report. "Due in large part to tax relief, the economy is strengthening and the growing economy is producing the tax receipts necessary to cut the deficit far faster than was forecast just five months ago."

Just last February, the White House predicted a $427 billion deficit for the budget year ending Sept. 30 and red ink totaling $1.1 trillion over five years. The five-year deficit improvement would total $326 billion.

Last year's deficit of $412 billion 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 new estimates reflect significant improvement in revenues, which are so far coming in at levels 15 percent higher than last year.

The nonpartisan Congressional Budget Office also sees improvement in the deficit. It said last week that the deficit for this year could dip below $325 billion. CBO's official update will be released next month.

Despite the improvement, the deficit picture remains far worse than when Mr. Bush took office in 2001, when both White House and congressional forecasters projected cumulative surpluses of $5.6 trillion over the subsequent decade. Then, it 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.