CBO Projects Record Deficit
Figure Could Reach $3.5 Trillion in the Next Decade if Tax Cuts Are Made Permanent
By Jonathan Weisman
Washington Post Staff Writer
Monday, January 26, 2004; 1:50 PM
The federal government will run a record $477 billion budget deficit this year and could accumulate nearly $1.9 trillion in additional debt through 2014, the non-partisan Congressional Budget Office said Monday.
If President Bush succeeds in making his 2001 and 2003 tax cuts permanent, the deficit could reach nearly $3.5 trillion over the next decade, with the tax cuts alone costing the Treasury $295 billion a year by 2014, CBO said.
Even without that change, the government's long-term finances have worsened considerably in the past six months, largely due to the war in Iraq and passage of the $400 billion law adding a prescription drug benefit to Medicare. In August, congressional forecasters predicted a 10-year deficit of $1.4 trillion through 2013. That figure has jumped nearly a trillion dollars since then.
"CBO's projections confirm that deficits loom far into the future," warned Rep. John M. Spratt Jr. (S.C.), the ranking Democrat on the House Budget Committee.
Treasury Secretary John W. Snow, in a speech delivered via satellite to a conference in London, said the administration remains committed to cutting the deficit in half over the next five years.
"Make no mistake; President Bush is serious about the deficit," Snow said.
White House officials cautioned that the CBO may have inflated its long-term deficit figure. By law, the agency had to assume that this year's $87 billion spending in Iraq and Afghanistan would continue at that level through the next 10 years. Indeed, CBO officials acknowledged that the deficit would be $880 billion smaller if all spending in Iraq and Afghanistan were to end this year.
But by most measures, the prospects appear bleak. CBO does anticipate the deficit falling steadily. The $477 billion deficit of 2004 would reach $268 billion in 2009, not quite half the 2004 level. The budget would reach a small, $13 billion surplus in 2014.
But that improvement would happen only if all of the Bush tax cuts are allowed to expire after 2010, something Bush has vowed to prevent.
Instead, the president has said he will tackle the deficit by controlling spending of programs not related to defense or homeland security. But even if all spending at Congress's discretion were to be frozen at this year's levels, the government would still run a $776 billion deficit over the next 10 years. If spending was frozen and the tax cuts were extended, that deficit would top $2.4 trillion.
The deficit has already become a major theme of Democratic candidates on the campaign trail. The $5.6 trillion in budget surpluses projected between 2002 and 2011 that Bush inherited in 2001 has become a $2.9 trillion deficit.
Bush has blamed the sluggish economy, the Sept. 11, 2001, attacks and the wars in Iraq and Afghanistan for the dramatic turnaround. But CBO's new forecasts come as the economy is turning around, and deficits continue even without war spending. |
