Washington ? President Bush is crediting his tax cuts for new deficit figures that are far lower than earlier White House estimates, but the red ink is expected to climb again next year and the longer-term outlook is more bleak.

White House figures released Tuesday estimate the federal deficit for the 2006 budget year ending Sept. 30 will be $296 billion – much better than the $423 billion Bush predicted in February but only a slight improvement from last year’s $318 billion.

Impressive corporate profits and big income gains by the wealthy were largely responsible for driving up tax revenues and, in turn, pushing the deficit down. On the other side of the ledger, the Iraq war and Gulf Coast hurricane relief have weighed on the deficit – as have interest payments paid on the rising national debt.

Bush portrayed the new estimates as validation of a budget policy centered on tax cuts passed in 2001 and 2003 and his clampdown on domestic agencies funded by Congress each year.