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Archive for Friday, July 8, 2005

Tax receipts put U.S. budget deficit in better shape

July 8, 2005

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— Higher-than-expected tax receipts and the steadily growing economy have combined to produce an improved picture for the federal budget deficit, congressional analysts say.

The deficit for the current budget year, which runs through Sept. 30, should be "significantly less than $350 billion, perhaps below $325 billion," according to the Congressional Budget Office. The agency produces nonpartisan estimates for Congress and will put out a full update Aug. 15.

Thursday's new figures come as the White House is to release its midyear budget review July 13. Administration figures are also expected to show significant improvement from the $427 billion current-year deficit it predicted in January.

Last year's $412 billion deficit was a record in dollar terms, but economists say the more significant measure is against the size of the economy. In those terms, the current deficit picture - a $350 billion deficit for this year would equal 2.9 percent of gross domestic product - is significantly better than deficits witnessed in the mid-1980s and early 1990s.

The biggest factors for the improving deficit picture are higher tax receipts from corporations and individuals.

As it addresses the deficit, the White House has focused chiefly on clamping down on domestic programs whose budgets are appropriated every year by Congress. That's only about one-sixth of the overall budget, however. Congress is also planning a five-year, $35 billion cut from automatically budgeted programs such as Medicaid and farm subsidies.

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