Report: U.S. deficit will be lower than expected

? Congressional forecasters said Monday the federal deficit this year, though still huge, won’t be as bad as originally projected – a welcome turn for President Bush who inherited healthy surpluses four years ago and saw them disappear in a sea of red ink.

At the same time, the fiscal outlook remains troubled for years to come, the nonpartisan Congressional Budget Office said.

The CBO predicted a $331 billion deficit for the budget year ending Sept. 30 and a $314 billion deficit for next year.

Last year’s deficit was a record $412 billion. In February, the White House had predicted this year’s shortfall would set a higher record of $427 billion.

The short-term improvement was attributed to an $84 billion surge in estimated tax receipts, including a 42 percent increase in revenues from corporate profits.

But unlike a competing White House estimate issued last month, CBO warned that the revenue improvements probably will not be sustained.

“Although the deficit for 2005 is lower than previously expected, the fiscal outlook for the coming decade remains about the same,” said the CBO report.

Still, the White House cheered the news. Until this summer, virtually every budget analysis issued by either CBO or the White House over the past four years contained bad news for the president, who in 2001 inherited inflated estimates predicting $5.6 trillion in surpluses over 10 years. He promptly muscled through Congress a $1.35 trillion tax cut.

But the economy hit a recession, the stock market tumbled and a surge in homeland security spending after the Sept. 11, 2001 terror attacks combined with the tax cuts to produce a return to deficits. Finally, the deficit news is getting a little better.

“This report confirms the dramatic improvement in the 2005 deficit picture that the administration reported last month,” said Scott Milburn a spokesman for the White House budget office. “The president is committed to the combination of strong economic growth and spending restraint that will keep us on track to cut the deficit in half by 2009.”

But the CBO report calls that promise – to halve a $521 deficit projected for last year to $260 billion – into question since it projects a $321 billion deficit for 2009. That figure may be inflated since it assumes the war in Iraq will continue to require cash infusions like the $82 billion passed by Congress in May.