- The Washington Times - Monday, August 15, 2005

An increase in corporate-tax receipts of about 42 percent, the result of soaring profits, is the primary reason the federal budget deficit will come in $59 billion lower than expectations, congressional forecasters said yesterday.

The federal budget deficit — $412 billion in fiscal 2004 and estimated in March to be $390 billion for fiscal 2005 — now is expected to be $331 billion, said Congressional Budget Office Director Douglas Holtz-Eakin.

After 2005, “what you see is a picture that the deficit will decline to $314 billion in 2006 … $324 billion … in fiscal year 2007, and then steadily diminish in the years going forward,” Mr. Holtz-Eakin said.

He said the biggest reason for the deficit decline is that corporate-tax receipts rose by more than 40 percent for the second year in a row. CBO’s original projection was 14 percent.

Republican lawmakers attributed the gains to President Bush’s tax cuts and pro-business economic policies.

“In my view, today’s revised outlook from the Congressional Budget Office is further evidence that the pro-growth economic policies put in place by Congress and the president are working,” said Sen. Judd Gregg, New Hampshire Republican and Senate Budget Committee chairman.

Budget Committee staffers said the cuts have helped create nearly 4 million jobs by allowing businesses to keep more of their earnings and thus expand and hire more people. New employees contribute revenue in the form of taxes rather than drain it with unemployment checks and other social-insurance benefits.

More deficit reductions are anticipated Sept. 16, when House and Senate appropriators are expected to find $34.7 billion in budget savings from funds that are unlikely to be spent this fiscal year.

“There were eight instructions to the authorizing committees, and from that, we expect them to detail how they will alter the revenue stream … but we don’t know yet what they will submit to us,” said Betsy Holohan, spokeswoman for Mr. Gregg.

Revenue sources from expected oil exploration in the Arctic National Wildlife Refuge also are projected.

Although 2005 looks like a strong year for the economy, “we have to guard against euphoria,” said Rep. John M. Spratt Jr. of South Carolina, the ranking Democrat on the House Budget Committee.

“If you include everything, the $331 billion becomes transitory, and we see deficits growing again after this year to $647 billion by 2015,” Mr. Spratt said.

He said policy changes such as revising taxes, increasing defense spending, reforming Social Security and making permanent the tax cuts set to expire in 2010 could keep the deficit rising.

Mr. Holtz-Eakin said making the tax cuts permanent could be problematic after 2010, when they are coupled with rapid growth in entitlement spending. Costs for Medicare, Medicaid and Social Security are projected to account for 53 percent of the federal budget by 2015.

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