Published on Tuesday, July 15, 2003 by Reuters
White House Set to Project Record Deficits
by Adam Entous
WASHINGTON - The White House was expected on Tuesday to forecast a record budget deficit approaching a half trillion dollars this fiscal year -- $150 billion worse than its earlier projections -- with little hope of a turnaround any time soon.
Democrats said the deficit of roughly $450 billion was close to crisis proportions and some fiscal conservatives urged President Bush to do more to reverse the trend before it gets any worse.
"It's bleak," said one Republican congressional source.
Administration officials said the budget projections would include, for the first time, initial costs of the war in Iraq.
Military operations there and in Afghanistan have cost roughly $4.8 billion a month -- $58 billion on an annual basis -- which is well over initial estimates.
"We are drifting into bigger and bigger deficits and what I find alarming is that neither party is willing to give up its political priorities to do anything about it," said Robert Bixby, executive director of the Concord Coalition, a balanced budget advocacy group
Rising deficits have yet to become a major political issue outside Washington, but some analysts believe that will change if they keep climbing ahead of the 2004 presidential election.
White House officials declined to comment on the new Office of Management and Budget (OMB) projections, which congressional aides expected to show a fiscal 2003 deficit of $450 billion or more, with a similar gap in 2004.
Just six months ago, the White House said it was expecting a deficit of $304 billion for the current fiscal year and $307 billion next year. That was before the war in Iraq.
"The numbers we're talking about are not detrimental to the economy. ... It's most important to protect America and get the country back to work and then fix this manageable deficit," said OMB spokesman Trent Duffy.
But the projected deficits would eclipse the previous record of $290 billion in 1992 when Bush's father was president. The U.S. government then enjoyed four straight years of budget surpluses between 1998 and 2001.
The White House sought to play down the size of the projected deficit, saying it was not a record when measured as a percentage of U.S. gross domestic product, and was helping fund national defense.
"What is (the) cost of a country that is attacked? What is the price that the American people would have to pay if something like that were to ever happen again?" said White House spokesman Ari Fleischer.
Democrats said federal budget deficits were approaching crisis levels not seen since the Reagan administration, and blamed Bush's sweeping tax cuts for the sharp reversal in the U.S. fiscal position.
As recently as 2001, White House and congressional analysts had predicted 10-year budget surpluses of up to $5.6 trillion. Many analysts now expect massive deficits through 2013.
"As bad as the budget is going to appear, it's actually worse," said the top Democrat on the House of Representatives Budget Committee, Rep. John Spratt of South Carolina.
Democrats and some analysts say that when Social Security is set aside, the actual deficit could approach $600 billion, or 5.5 percent of GDP, one of the highest since World War II.
Copyright 2003 Reuters Ltd