WSJ(1/30) CBO Projects Widening Deficits, Despite Tax Cut
29 Jan 20:03
By Shailagh Murray
WASHINGTON -- The government's fiscal picture is turning bleaker, according
to a Congressional Budget Office forecast, and the federal budget will sink
deep into deficit if war breaks out and President Bush gets the tax cuts and
Medicare drug benefit he is seeking.
In its semiannual report to the House and Senate Budget committees, the CBO
projected shortfalls of $199 billion in 2003 and $145 billion in 2004 -- absent
a war and tax cuts. Last summer, the nonpartisan budget office estimated
deficits of $145 billion in 2003 and $111 billion in 2004.
Democrats pounced on the increases as proof that Mr. Bush is ruining the
economy. "His policies have plunged the nation back into deficits and debt,
Social Security and Medicare are threatened, and the administration is
shortchanging domestic priorities," said North Dakota Sen. Kent Conrad, the
Senate Budget Committee's ranking Democrat.
Republicans said the numbers were expected and underscored the need to juice
up the economy. House Budget Committee Chairman Jim Nussle of Iowa said the
estimates "confirm what was already anticipated." Senate Budget Committee
Chairman Don Nickles of Oklahoma said Congress must work to "restore growth in
our economy and restrain the growth in spending or we will never balance the
budget."
The CBO estimates don't factor in any of the big-ticket items on the
legislative horizon. For instance, the outlook assumes the 2001 tax cuts will
expire as scheduled in 2010. That is highly unlikely. Nor does the tally
include a prescription-drug benefit for Medicare. Mr. Bush's 2003 budget
commits $400 billion to creating the benefit, and Democrats would spend even
more.
Without those extra costs, the CBO forecast shows a $27 billion surplus in
2007 and a $451 billion surplus in 2012. Over 10 years -- from 2004 through
2013 -- the federal budget will show a unified surplus of $1.3 trillion, the
CBO said.
By extending tax cuts and adding the Medicare benefit, the deficit would
swell to about $200 billion in several years, and would remain that size or
greater "as far as the eye can see," said acting CBO Director Barry Anderson.
Nor does the CBO outlook consider a potential war with Iraq, what Mr.
Anderson calls "the big hippopotamus under the living-room carpet." Citing
estimates by the private forecasting firm Macroeconomic Advisers LLC, the CBO
report shows the war could cost $64 billion in 2003 and an extra $119 billion
in 2004. Mr. Anderson said the figure could end up higher, depending on oil
prices and how the economy responds.
An expanded version of the CBO report by the House Budget Committee
Democratic staff takes into account other additional costs, in particular an
estimated $339 billion over 10 years to overhaul the alternative minimum tax.
The tax is a flat tax designed to limit deductions by wealthy people, but it
increasingly ensnares the middle class. Including changes in that tax, war
costs, additional tax cuts and Mr. Bush's domestic priorities, the Democrats
project a $2 trillion deficit for 2004-2013.
Other items not accounted for by the CBO include $674 billion in tax cuts
that the president wants Congress to pass this spring and other health-care and
education initiatives. Due to the war and Mr. Bush's crowded domestic agenda,
Mr. Anderson said the economic uncertainty is "greater than usual."
(END) Dow Jones Newswires
01-29-03 2003ET |
