Federal deficit hits 4-year low

President credits `pro-growth policies'

Democrats say reduction is exaggerated

October 12, 2006|By Molly Hennessy-Fiske | Molly Hennessy-Fiske,LOS ANGELES TIMES

WASHINGTON -- President Bush got some welcome news yesterday as the federal deficit for last fiscal year fell to $247.7 billion - a four-year low - helped by a nearly 12 percent jump in tax revenue. Bush said the numbers were more evidence that the economy is booming as he credited tax cuts that he wants to see extended.

With less than a month before the midterm congressional elections, Bush seized on the news to reassure voters that the economy is in good shape, with more new jobs and investment leading to greater tax revenues.

"Tax relief fuels economic growth, and when the economy grows, more tax revenues come to Washington. And that's what's happened," Bush said at an afternoon news conference, where he was joined by Treasury Secretary Henry M. Paulson Jr.

Bush said "pro-growth policies" that congressional Democrats resisted helped him deliver on a campaign promise to cut the deficit in half three years ahead of schedule.

The administration has drawn criticism for its deficit projections, and Democrats cried foul again yesterday. They said the deficit reduction was exaggerated because the 2004 figure Bush quoted was a projection that was later reduced by $100 billion, meaning the fiscal 2006 deficit actually dropped by 39 percent in two years.

"Cutting the deficit in half from an intentionally inflated high point is a misleading goal and certainly no measure of success," said Sen. Kent Conrad of North Dakota, the ranking Democrat on the Senate Budget Committee.

Conrad added that Bush also did not note that he is tapping Social Security taxes through off-budget borrowing. Accounting for that would have added $550 billion to the deficit last fiscal year, money that will have to be repaid as 78 million baby boomers start retiring in 2008.

Other Democrats said the president overstated the strength of the economy and gave too much credit to tax cuts.

"Only a president with such a historically bad economic record would be this excited about a $248 billion deficit," said Rep. Carolyn B. Maloney of New York, ranking Democrat on the Joint Economic Committee. "The large budget deficits run up by President Bush have produced record low national saving, record high trade deficits and record high foreign borrowing."

While Bush took credit for "restraining spending," federal expenditures rose 7.4 percent compared with 2005, to a record $2.65 trillion. The biggest spending increases: education, up 28.1 percent; Medicare, up 12.5 percent; and interest on the public debt, up 15.2 percent. Tax revenues also reached an all-time high of $2.41 trillion.

Republicans, many of whom face newly competitive races in the aftermath of the congressional page scandal, were quick to see yesterday's budget figures as cause for celebration.

Among them was House Speaker Dennis Hastert of Illinois, who has been a lightning rod for criticism in the Foley scandal.

"Coupled with an improving deficit picture, inflation remains low, unemployment is at historically low levels, family income is up, and gas prices at the pump fell by more than 70 cents per gallon in just a few months," Hastert wrote. He promised that if elected, Republicans would "keep driving down the deficit with responsible fiscal policies." Democrats, he said, "are promising to roll back the Bush tax cuts should they be in the majority next year."

Molly Hennessy-Fiske writes for the Los Angeles Times.

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