Deficit Could Top $400 Billion
Washington Post
By Jonathan Weisman
Washington Post Staff Writer
Friday, January 13, 2006; Page A19
Driven by the cost of hurricane relief, the federal budget deficit is
expected to balloon back above $400 billion for the fiscal year that ends in
September, reversing the improvements of 2005, a White House official told
reporters yesterday.
But some budget analysts cautioned that the estimate should be considered
more of a political mark to inform the coming budget debate than an economic
forecast.
This is the third straight year in which the White House has summoned
reporters well ahead of the official budget release to project a
higher-than-anticipated deficit. In the past two years, when final deficit
figures have come in at record or near-record levels, White House officials
have boasted that they had made progress, since the final numbers were below
estimates.
"This administration has a history of overestimating the deficit early in
the year, lowering expectations, then taking credit when it comes in below
forecast," said Stanley E. Collender, a federal budget expert at Financial
Dynamics Business Communications. "It's not just a history. It's almost an
obsession."
Indeed, the dire new forecast came the same day that Treasury Department
officials were touting a very different picture: The federal government posted
the first budget surplus for December in three years, buoyed by a rush of
corporate tax payments that more than offset record spending. On Jan. 6, the
nonpartisan Congressional Budget Office reported that the deficit for the first
three months of the fiscal year was about $119 billion, almost exactly where it
stood for the first quarter of fiscal 2005.
After four years of budget surpluses, the government fell back into a
deficit in fiscal 2002, after which the deficit climbed to $378 billion in 2003
and $412 billion in 2004. In 2005, the tide of red ink receded to $319
billion.
Still, Joel David Kaplan, the deputy director of the White House budget
office, lamented the rising tide of red ink, ascribing it to necessary spending
in the hurricane-ravaged Gulf Coast. "We have made substantial investments in
the region and the new deficit projections will include costs of Katrina and
Rita recovery," he said. "We believe that those increased outlays associated
with Katrina recovery efforts are a temporary event."
Kaplan joined top Bush administration officials who in recent days have
warned that the president's budget for fiscal 2007, due out next month, will
call for significant belt-tightening.
A projected deficit back above $400 billion is in line with private-sector
forecasts, which ascribe the reversal not only to hurricane spending, but to an
emergency war-funding request due out soon that could approach $100 billion.
Adding to the problem, Congress adjourned last month without passing a
temporary fix to limit the reach of the alternative minimum tax, a parallel tax
system enacted to hit the rich but increasingly affecting the middle class.
In the coming months, Congress will almost certainly pass an AMT cut. The
Senate-passed version of AMT relief would cost the Treasury $30.5 billion in
revenue, $12 billion of that in fiscal 2006.
Congressional Republicans seized on the White House estimate to urge
lawmakers to take budget cutting more seriously.
"The expected increase in the deficit is to some degree understandable due
to the extraordinary expenses incurred as a result of the Gulf Coast
hurricanes. But it is still unacceptable," said Senate Budget Committee
Chairman Judd Gregg (R-N.H.).
|