WASHINGTON – The White House Friday forecast that the U.S. budget deficit for this year will be a highest ever – $445 billion. That is lower than the administration previously predicted but nearly 20 percent larger than 2003’s previous record shortfall.
The administration’s annual summertime budget update forecast shortfalls falling to $331 billion next year, before dropping to $229 billion by 2009.
Administration officials hailed the budget figures as a solid improvement over the deficits that analysts forecast early this year, and said they were on their way to their goal of halving this year’s shortfall in five years. The White House estimated a $521 billion budget gap for 2004 in February, while the nonpartisan Congressional Budget Office predicted a $477 billion deficit.
President Bush’s budget director, while calling the figure “unwelcome,” said the new forecast for fiscal year 2004 – in line with recent congressional forecasts – provides evidence that the economy is growing and tax receipts are recovering.
But Democrats countered that the new estimate looked good only in comparison with a previous estimate of $521 billion that was unrealistically high, and that the deficit is still on pace to be $70 billion higher than last year’s $375 billion.
Joshua Bolten, director of the Office of Management and Budget, said the government was ahead of pace to reach Bush’s vow that the deficit would be cut in half over five years. But he said the target for the reduction would be based not on an actual deficit but on the earlier, overstated deficit forecast for 2004. He also said the predicted reduction would be based not on actual dollars, but on the deficit as a percentage of gross domestic product.
The deficit for fiscal 2004, which ends Sept. 30, would be 3.8 percent of gross domestic product, Bolten said, well below the modern high of 6 percent in 1983.
The White House projected a deficit of $331 billion for fiscal year 2005, which begins Oct. 1. But Bolten said declining deficit projections for the next four years did not include additional emergency spending, which is expected to reach tens of billions of dollars.
“You need to factor in that we will need additional spending, at least in the short term, in both Iraq and Afghanistan,” he said.