Analyst revises deficit estimates

August 18, 2006|By RICHARD SIMON | RICHARD SIMON,LOS ANGELES TIMES

WASHINGTON -- The Congressional Budget Office revised its estimates of the federal deficit yesterday, predicting that it would shrink to $260 billion in the current fiscal year - lower than previously projected - but rise to $286 billion in fiscal 2007, which begins Oct. 1.

The new figures are stoking a partisan debate over fiscal responsibility as the midterm elections approach. Republicans cheered the prospect of a third straight year of decline in the deficit as evidence that the economy is benefiting from GOP-sponsored tax cuts.

But the top Democrat on the House Budget Committee, Rep. John M. Spratt Jr. of South Carolina, was disdainful, contending that the continued flow of red ink was "no reason to celebrate, especially when the long-term outlook remains so bleak."

While Congress' nonpartisan fiscal analyst offered a lower deficit estimate for this year - down from the $319 billion shortfall recorded last year - deficits are projected through the next decade, under existing spending and tax policy. The figures raised additional questions about President Bush's desire for Congress to make permanent a number of his first-term tax cuts, which are scheduled to expire at the end of 2010.

In February, the White House forecast a $423 billion deficit, but it revised that figure last month to $296 billion, citing improved economic activity - and consequent increased tax revenue - resulting from the tax cuts.

Issuing its own figures in March, the Congressional Budget Office had predicted a $371 billion deficit. Yesterday, the CBO attributed the new lower estimate to higher-than-anticipated tax revenues, especially from corporate profits.

Republicans said the revised CBO estimate shows that tax cuts are working to improve the economy.

"Just as we predicted, tax revenues have increased - and as a result, the budget deficit has dropped," said Rep. Jeb Hensarling, a Texas Republican on the House Budget Committee.

White House spokesman Tony Snow said Bush remained confident that he would achieve his goal of halving the deficit by the end of his second term, if not sooner. But Snow dismissed the forecast of a higher budget deficit next year as an "inexact science," likening it to "asking if the weatherman's right about next Tuesday."

Democrats warned that the country continues to face fiscal troubles because of the debt that will accumulate as the nation's 76 million baby boomers retire. That generation's oldest members will qualify for Social Security in 2008 and Medicare in 2011.

The new deficit estimate "in no way means that our nation's fiscal problems are behind us," said Sen. Kent Conrad of North Dakota, top Democrat on the Senate Budget Committee.

Richard Simon writes for the Los Angeles Times.

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