Deficit may reach $337 billion

WASHINGTON – The budget deficit will rise to at least $337 billion this year, and may well approach or exceed $400 billion because of tax cuts and new spending for hurricane relief and the war in Iraq, congressional budget analysts said Thursday.

The latest Congressional Budget Office data also suggest President Bush is unlikely to be able to keep his promise to cut the federal deficit in half by the end of his term.

Even assuming a phasing down of the war in Iraq and the costs of hurricane relief, implementing tax cuts sought by Bush and Congress would produce deficits exceeding $300 billion through the end of the decade, the nonpartisan CBO says.

The report and Bush’s annual budget submission kick off a predictably partisan election-year debate over the budget, which will play out against the backdrop of rising deficits, record spending and renewed concern about lawmakers’ penchant for home state pet projects.

Bush promised in 2004 to close the deficit from a then estimate of $521 billion to $260 billion by 2009, and he promised again Thursday to meet that goal when he sends an austere fiscal 2007 budget to Congress on Feb. 6.

“We can cut our deficit in half by 2009, and make sure the American people still get their tax relief,” Bush told reporters.

CBO’s official baseline shows the deficit dropping to $241 billion by 2009 and $114 billion by 2011. But those estimates assume Bush’s tax cuts expire and the alternative minimum tax is left alone. That tax, designed to stop the wealthy from avoiding all taxation, threatens more middle class taxpayers every year because of inflation.

Under a more realistic scenario, extending tax relief, drawing down troop levels in Iraq, and phasing out hurricane relief, CBO predicts a $332 billion deficit for 2009, the last fiscal year for which Bush will be responsible.

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