WASHINGTON (Reuters) - A top White House economic adviser said on Wednesday the United States would likely run a budget deficit of between 4 and 4-1/2 percent of U.S. gross domestic product in fiscal 2004 -- or roughly $440 billion to $495 billion.

White House Council of Economic Advisers Chair Gregory Mankiw said growing shortfalls were a concern.

"Next year we will probably have a deficit in the ballpark of 4 percent of GDP (news - web sites), a little more -- maybe 4-1/2 percent of GDP," Mankiw told the Exchequer Club in answer to a question.

Aides said Mankiw was referring to fiscal 2004 and based his estimates on a roughly $11 trillion economy.

"The deficit is a concern and the president has said many times ... that he's committed to getting it down," he said.

"He wants to shrink it in half toward 2 percent of GDP over five years, and his (fiscal 2005) budget will reflect that," Mankiw said, referring to a budget plan the White House will unveil in early February.

"There are two ways to do that: one is to get the economy growing again in order to get revenues, and the other is to restrain spending," Mankiw said.

Mankiw also told the group that the large U.S. trade gap was not necessarily a problem for the economy.

"I don't view it, in and of itself, as a risk to the U.S. economy," he said, saying it was largely symptomatic of a relatively slower pace of growth among U.S. trading partners.

"Slow growth abroad is one of the major contributors to our trade deficit," Mankiw said, because it curtails U.S. exports, and it contributes to a desire of overseas investors to place their money in the United States.

Mankiw said part of an adjustment toward more-balanced trade could involve an increase in domestic U.S. savings.

He noted President Bush (news - web sites) had early this year proposed an expansion of tax-free savings accounts, but he stopped short of saying they would resurface in the fiscal 2005 budget plan.

"One of the things I've learned in my new job is don't get ahead of the boss, so I won't suggest it will be in the next budget. But I encourage you to stay tuned," Mankiw said.

Mankiw, who noted an updated administration forecast would be released with the budget proposal, said he expected the U.S. economy to grow above its long-term historical average of 3.3 percent next year but then revert toward the long-run trend as the economy approaches full employment.

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Commentary:
Ok, here's the deal and this part blows the entire republican party apart. Growth in 2004 is expected to be above average because we're borrowing tons of money. But even with above average growth the White House is projecting record deficits.

Since we had record deficits when we had slow growth (the first three years of Bush) and we're going to have a record deficit when we have better than average growth, then it's intellectually dishonest for the WH to make claims that more growth will reduce deficits or return us to the record surpluses we enjoyed under President Clinton.

Putting this another way, the deficit Bush is expected to create in 2004 is around $500 billion, which represents the same amount of debt created by all congresses from our first congress through 1974. No president and no congress in US history has been this irresponsible.