Budget Deficit of $159 Billion Reported
Gephardt Calls 'Incredible Turnaround' a Campaign Issue for Democrats
"The tax cuts passed last year had a relatively minor
role in the budget deficit for fiscal 2002, but their impact is
scheduled to increase significantly over the 10-year period.
"According to the White House's own budget numbers, the biggest reason
for the reversal is last year's tax cut," Kahn said of the 10-year outlook.
"Just as the baby boom generation retires, the deficit will start to boom."
washingtonpost.com
By Dana Milbank
Washington Post Staff Writer
Friday, October 25, 2002; Page A16
The Bush administration late yesterday announced a budget deficit of
$159 billion for the fiscal year just ended, confirming that the federal
government officially returned to the red for the first time since 1997.
The announcement of the budget deficit for fiscal year 2002 was not
a surprise. The administration had projected a slightly larger deficit for the
year, as the surplus was consumed by recession, war spending and tax cuts.
Still, Democrats pounced on the official figures -- a $286 billion swing
from the previous year -- as evidence that the Bush administration had
presided over what the opposition called the largest one-year fiscal reversal in the nation's history.
President Bush's budget director, Mitchell E. Daniels Jr., said the deficit figure
made it "absolutely essential" that the government keep tight
controls over spending.
"It's now clear that the unexpected surge in revenues toward the
end of the last decade was temporary, and that revenues are returning to
historic levels for reasons unrelated to legislated changes," he said in
a statement. "At the same time, unexpected new defense and homeland
security spending is needed to protect America from new threats."
House Minority Leader Richard A. Gephardt (D-Mo.) countered that
the numbers represented "an incredible turnaround, probably the most
stunning change in figures we've ever seen." In an interview, Gephardt
indicated Democrats would use the new figures as evidence of broader
economic troubles as they campaign for the Nov. 5 midterm elections.
"It's just one more part of the picture," he said. "We are heavily into
deficits and spending Social Security money in addition. The economy is
stuck in neutral if not falling, and we could be headed for a double-dip recession."
The 2002 budget figures were scheduled to be released today, but
the administration released the key numbers last night in what Democrats
interpreted as an effort to bury the bad news on a day dominated by
developments in the sniper case. The Office of Management and Budget
reported receipts of $1.853 trillion for the year and spending of $2.012 trillion,
yielding the $159 billion deficit in the year ended Sept. 30.
The surplus began in 1998, peaked at $237 billion in 2000 and slipped
to $127 billion in fiscal 2001. The 2002 deficit was the largest since fiscal
1995's $164 billion shortfall.
Earlier in the week, Daniels estimated the fiscal 2002 deficit would be about $165 billion.
The Congressional Budget Office had expected $157 billion.
The federal deficit, now official, could have implications for arguments over
government spending when Congress returns next month. Bush, in
campaigning for Republican candidates, has been calling on Congress to make
last year's tax cuts permanent. They are set to expire after nine
years under current law.
"In order to make sure that our economy grows, in order to make
sure the job base is strong, you need to have a congressman who will join me in
making sure that tax relief plan we passed is permanent and doesn't go away,"
the president said at a political rally late yesterday in Auburn, Ala.
Bush did not mention the budget figures, which were released just before he spoke.
Thomas Kahn, minority staff director of the House Budget Committee, said
making the tax cuts permanent would cause a deficit of $408 billion
over the 10 years through 2011. If the cuts expire, there would be a 10-year surplus
of $336 billion, he said.
Forecasts by the CBO at the beginning of 2001 had put the 10-year surplus
at $5.6 trillion, before economic troubles, increased spending and the
tax cut altered the picture. The tax cuts passed last year had a relatively minor
role in the budget deficit for fiscal 2002, but their impact is
scheduled to increase significantly over the 10-year period.
"According to the White House's own budget numbers, the biggest reason
for the reversal is last year's tax cut," Kahn said of the 10-year outlook.
"Just as the baby boom generation retires, the deficit will start to boom."
The administration remained optimistic about the economic outlook.
"Going forward, I am confident that we are on the road to recovery," Treasury
Secretary Paul H. O'Neill said in a statement.
© 2002 The Washington Post Company
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