- The Washington Times - Tuesday, July 11, 2006

1:01 p.m. President Bush today touted new deficit figures showing considerable improvement upon earlier administration predictions, saying it shows the wisdom of his tax cuts. Mr. Bush announced the figures himself — a task that for the most part has been left to lower-ranking administration officials in the past. The new figures show the deficit for the budget year ending Sept. 30 will be $296 billion — much better than the $423 billion Mr. Bush predicted in February and a slight improvement over 2005. The president said the improvement is because of tax cuts he pushed in 2001 and 2003 and his clampdown on domestic agencies funded by Congress. “These tax cuts left nearly $1.1 trillion in the hands of American workers and families and small business owners. And they used this money to help fuel an economic resurgence that’s now in its 18th quarter,” Mr. Bush said. “Economic growth fueled by tax relief has sent our tax revenues soaring.” The results are less impressive when compared to the $318 billion deficit posted last fall for fiscal 2005. Despite strong revenues, the high costs of the Iraq war and Gulf Coast hurricane relief have weighed on the deficit — as have higher interest payments paid on the national debt. However, when measured against the size of the economy — at 2.3 percent of gross domestic product — the 2006 deficit would be lower than the deficits of 17 of the past 25 years. If recent patterns hold, this year’s deficit figure should improve even more by the time final figures are announced in October. The deficit for next year would ease back up to $339 billion, reflecting war costs and cautious revenue projections. The White House predicts it will drop to $188 billion in 2008, but that assumes a sharp slowdown in spending on the Iraq war. “The 2006 deficit may be a bit lower, but it represents a $600 billion swing from the surplus projected in 2001. And a deficit of $296 billion is still a large deficit. In nominal terms, it’s one of the four largest in history,” said Rep. John Spratt Jr. of South Carolina, top Democrat on the Budget Committee. “Let’s not boast about a $300 billion deficit,” said Senate Minority Leader Harry Reid, Nevada Democrat. “Any statistic you look at recognizes the rich in America are getting richer, the poor are getting poorer, and the middle class is getting squeezed.” Revenues are running $115 billion greater than expected earlier this year, the White House said, reflecting particularly strong growth in taxes paid on corporate profits and income taxes paid by wealthier people and small businessmen who pay taxes quarterly instead of having them withheld by employers. Taxes paid by individuals are growing at a 15 percent rate, the White House says, while corporate taxes are rising at a 19 percent rate. “Bold pro-growth tax policies enacted by Congress and the president have sparked unprecedented economic growth,” said Senate Budget Committee Chairman Judd Gregg, New Hampshire Republican. But Mr. Gregg and budget analysts across the spectrum say the real challenge lies ahead, when the retirement of baby boomers threatens to swamp Social Security and Medicare. Still, the new figures allowed Mr. Bush to say he will fulfill his promise, made in early 2004, to cut the deficit in half by the end of his second term. His deficit-halving promise was based on 2004 estimates projecting a $521 billion deficit for the 2004 budget year, setting the goal of $260 billion.

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