- The Washington Times - Monday, January 26, 2004

Fast economic growth and low inflation will not suffice to eliminate the federal deficit after it hits a record $477 billion this fiscal year, the Congressional Budget Office estimated yesterday.

Growth averaging 4 percent to 5 percent in the next two years, coupled with inflation little above 1 percent, should help to shave more than $100 billion off the deficit, the agency said. But that improvement is overwhelmed in the long run by the nearly $700 billion added to the deficit in the past six months with the enactment of a Medicare prescription-drug plan and other spending increases.

“Any wishful thinking on the part of politicians that economic growth alone will avoid the need to make hard choices should end with today’s CBO report,” said Robert L. Bixby, executive director of the Concord Coalition, an organization aimed at educating the public about federal budget issues. “Large deficits persist even though CBO now assumes a very strong economic recovery.”

The CBO report also shows that the goal President Bush has set for himself in his budget next week — cutting the deficit in half by 2009 — is not very ambitious. The deficit would fall by nearly that much — to $268 billion — as long as Congress and the president take no further action to increase it and allow discretionary spending to grow at the rate of inflation, the CBO estimated.

But because Mr. Bush wants to continue robust spending increases for defense, space, education and homeland security, among other programs, he is expected to propose a near freeze on the rest of about $300 billion worth of discretionary programs to help attain the goal.

“Make no mistake, President Bush is serious about the deficit,” said Treasury Secretary John W. Snow in a speech in London, repeating the administration’s pledge to cut the deficit from 4.2 percent of the gross domestic product to below 2 percent.

The president also is proposing to extend his tax cuts, which, the CBO says, will increase deficits by $1.9 trillion in 10 years. Allowing the tax cuts to expire, as some Democratic presidential candidates are advocating, would go a long way toward eliminating the deficits, the agency found.

While promising to keep the tax cuts, Republicans are advocating deep reductions in domestic discretionary programs as the best way to slash the deficit. Few have proposed to curb the rate of growth in the fastest-growing spending programs — Medicare, Medicaid and other entitlements where growth once again is approaching double digits.

But for Republicans to balance the budget through cuts in discretionary spending, they would have to go much further than they have proposed, the CBO said. Even a “hard freeze” at this year’s level of $876 billion on all discretionary programs, including defense and homeland security, would produce only $1.1 trillion in savings over 10 years — paying for little more than half the president’s tax cuts, it estimated.

“It’s my hope that these projected deficits will scare Congress straight,” said Rep. Jeff Flake, Arizona Republican. “We simply cannot continue to spend and spend and spend without budgetary consequences. Tax cuts have helped by stimulating the economy, but Congress has to do its part on the spending side, and right now that’s just not happening.”

Democrats said Republicans must bear responsibility for the dire fiscal situation because they control the executive as well as the legislative branches.

“It is becoming clear that the Bush administration has no plan to eliminate these deficits,” said Rep. John M. Spratt Jr., South Carolina Democrat and ranking member on the House Budget Committee.

“The president’s proposal to hold domestic appropriations to 1 percent growth in this year’s budget — even if enacted — would do virtually nothing to reverse the deficit damage. Domestic appropriations in the current budget cycle increased by only 1 percent, and the deficit still deteriorated by $102 billion.”

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