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Archive for Wednesday, August 28, 2002

Budget deficit projections worsen

August 28, 2002

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— The federal government's budget will slide into the red for four years, government analysts said Tuesday in a report sure to vault tax and spending policies into the election-year battle for control of Congress.

Democrats and Republicans accused each other of putting the government on a path toward fiscal disaster after four years of budget surpluses. Just six months ago, the analysts were predicting a return to surpluses next year.

The nonpartisan Congressional Budget Office said Tuesday that surpluses like the $237 billion recorded the last year of President Clinton's tenure won't resume until President Bush's tax cuts expire in 2010, as current law requires and only if Congress keeps a lid on military and social spending.

Republicans, who want to make the tax cuts permanent, said the CBO numbers are not surprising in light of the recession and the costs of the war on terrorism. But they insisted that Congress must put a tight hold on future spending.

Democrats blame much of the budget shortfalls on the $1.35 trillion, 10-year tax cut enacted last year, and warned that Republican policies could bankrupt the government when today's baby boomers start collecting Medicare and Social Security benefits a decade from now.

"The clock is ticking away, the baby boomers are marching toward their retirement," said Rep. John Spratt of South Carolina, the top Democrat on the House Budget Committee.

From Bush's ranch in Crawford, Tex., White House press secretary Ari Fleischer said: "The president believes the lesson from today's CBO numbers is that Congress needs to hold the line on spending. And if Congress won't do it, the president will do it for Congress."

In January last year, the CBO and the White House Office of Management and Budget both predicted a budget surplus, with the inclusion of Social Security funds, of some $5.6 trillion through 2011. But the recession, repercussions from the Sept. 11 attacks, an unexpectedly large decline in tax revenues and double-digit percentage growth in federal spending have all but eliminated that projection.

"Through a combination of wrongheaded fiscal policy and tentative economic leadership, we have now suffered one of the most dramatic fiscal turnarounds in American history," said Senate Majority Leader Tom Daschle, D-S.D.

The CBO now estimates the government will be $157 billion in the red in fiscal 2002, compared with a $127 billion surplus in fiscal 2001, and that the deficit will hit $145 billion next year. Fiscal 2002 runs through Sept. 30 this year.

It said the government should creep back into the black with a $15 billion surplus in 2006 and could accumulate a $1 trillion surplus for the 2003-2012 period if there are no big increases in spending and if the tax cuts are allowed to expire as scheduled.

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