Mr. Bush's fiscal legacy before the elections
Almost regardless of what happens in Iraq and Afghanistan, President Bush is very unlikely to fulfill his promise of reducing the federal budget deficit by half within five years, the nonpartisan Congressional Budget Office said today. In the last independent assessment of Mr. Bush's fiscal legacy before the elections, the Congressional agency said that if there were no change to existing law, the federal deficit would decline only modestly from a record of $422 billion in 2004 to about $312 billion in 2009. If Mr. Bush persuades Congress to make his tax cuts permanent, he will fall even farther short of his promise. The federal deficit could reach nearly $500 billion in 2009 and the federal debt could swell by $4.8 trillion over the next decade. The new estimate is the first time that the Congressional agency has projected that President Bush will not be able to fulfill his promise, made last February, to cut the deficit by half. Budget projections, by Congress as well as the administration, have been notoriously wrong in the past — failing to anticipate a flood of tax revenue during the last 1990's and then badly underestimating a plunge in revenue after the stock market collapsed in 2000. But the new report is sobering because it arrives at similar conclusions even when analysts made extremely optimistic assumptions about war costs in Iraq and robust economic growth, informs the NYTimes. According to Bloomberg, U.S. budget deficits will total $2.3 trillion over the next decade and may be almost double that if tax cuts are renewed as President George W. Bush has requested, the Congressional Budget Office said. The non-partisan agency forecast the deficit will reach a record $422 billion this year and swell to more than $4.3 trillion over the next 10 years unless all tax breaks including those pushed by Bush expire on schedule. The CBO report illustrates the extent to which tax cuts and military costs in Iraq and Afghanistan will influence the budget balance in the next decade. The report also echoes a warning from Federal Reserve Chairman Alan Greenspan that rising Social Security and Medicare benefits may present ``increasingly stark choices'' for policy makers as the baby boom generation ages. ``At some point it will have an effect in sending real interest rates higher,'' said Andrew Harding, who oversees $6 billion as director of fixed-income at National City Investment Management Co. in Cleveland. The deficit for the fiscal year that ends Sept. 30 is estimated to be 3.6 percent of U.S. gross domestic product, smaller than in the mid-1980s and early 1990s when it often exceeded 4 percent, the agency said. In fiscal 2005, the deficit is forecast to narrow to $348 billion, or 2.8 percent of GDP, the CBO said in a report on its Web site. The federal deficit will swell to a record $422 billion this election year but fall short of even more dire forecasts, Congress' top budget analysts projected Tuesday in a report that became instant fodder for both political parties. The nonpartisan Congressional Budget Office said the shortfall would shrink to $348 billion next year - still the third worst ever in dollar terms. Last year's $375 billion gap was the previous record. The projections reverberated on the campaign trail, where Democrats immediately criticized President Bush for what will be the fourth consecutive year in which the budget's bottom line has worsened. They linked the figure to the 900,000 net job loss since Bush took office and the recent announcement that Medicare's premiums will rise by 17 percent next year. ``W. stands for wrong, the wrong direction for America,'' said Democratic presidential candidate Sen. John Kerry of Massachusetts, invoking Bush's middle initial, reports the Guardian Unlimited.
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