White House 2005 Budget Ahead of Schedule


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White House slashes 2005 budget gap forecast

Wed Jul 13, 2005 12:51 PM ET

By Caren Bohan

WASHINGTON (Reuters) - The White House on Wednesday slashed its forecast for the fiscal 2005 budget deficit by nearly $100 billion after the government raked in unexpectedly large tax revenues in recent months.

The Bush administration projected a deficit of $333 billion for the fiscal year ending Sept. 30, according to the Office of Management and Budget's "midsession" update.

President Bush, at a meeting with his Cabinet, hailed the numbers and said he could cut the deficit gap in half sooner than his earlier promise of 2009.

"I told the Congress and told the country we'd cut the deficit in half by 2009," Bush told reporters during the meeting.

"We're ahead of projections now. These numbers indicate that we're going to cut the deficit in half faster than the year 2009 so long as Congress holds the line on spending," he added.

The revised budget gap was sharply narrower than the $427 billion estimate the Bush administration gave in February with the release of its proposed budget. It was also down from 2004's deficit of $412 billion, which was a record high.

Private analysts had projected a lower deficit, but some cautioned that temporary factors, such as capital gains receipts from the jump in stock prices late last year, were at play.

They also warned that spending on entitlement programs such as the Medicare health program for seniors is expected to climb steeply in coming years.

Democrats noted that Bush, who inherited record budget surpluses when he took office in 2001, presided over a shift to record deficits that have shown improvement only recently.

Rep. John Spratt of South Carolina, the senior Democrat on the House of Representatives Budget Committee, said the news "needs to be put in perspective."

"Over the last three years the Bush administration has posted the worst three deficits in American history and even with this slight improvement, 2005 remains the third biggest on record," Spratt said.

Bush's promise to cut the deficit in half by 2009 uses as its starting point the $521 billion projection it gave last year for 2004. Critics accuse the White House of having used an inflated projection and say it is a misleading benchmark since the deficit never hit that level.

According to the midsession projections, even using the $412 billion deficit of 2004 as a starting point the goal of halving the deficit would be met by 2008. Still, analysts warn the biggest budget challenges are in years beyond 2008.

The White House said the new projections would mean the deficit as a percentage of gross domestic product would drop to 2.7 percent from last year's 3.6 percent.

"Due in large part to tax relief, the economy is strengthening, and the growing economy is producing the tax receipts necessary to cut the deficit far faster than was forecast just five months ago," the OMB said in a summary of the budget update.

Democrats have blamed Bush for racking up big deficits with tax cuts they deem unaffordable. Bush has boosted spending sharply on the military and homeland security in the aftermath of the Sept. 11, 2001, attacks and amid the Iraq war.

The White House also lowered its forecasts for budget gaps in coming years, saying that over the 2006-2010 period, government red ink would total $1.07 trillion. In February, it had put that five-year figure at $1.39 trillion.

In future years, mandatory programs like the Medicare health program for senior citizens and the Social Security retirement program are expected to pose the biggest budgetary challenge as the population ages.

http://today.reuters.com/news/newsArticle....H-BUDGET-DC.XML

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