- The Washington Times - Tuesday, July 11, 2006

This year’s federal deficit is now projected to be $296 billion, President Bush announced yesterday, $127 billion less than predicted just six months ago and leaving the administration a year ahead of its pledge to cut the deficit in half by 2009.

“This economy’s growing, federal taxes are rising, and we’re cutting the federal deficit faster than we expected,” Mr. Bush said, turning the administration’s annual midsession budget review report to Congress into a victory lap for his tax-cutting policies during his first term.

But Mr. Bush said tackling the deficit in the long run will require action on Social Security, and he challenged Congress to stop posturing on the issue and instead to have a “sense of obligation” to fix it.

“The time of playing politics with Social Security and Medicare and Medicaid is over,” said the president, speaking in the East Room of the White House. “We need to fix this for younger generations of Americans to come.”

In transmitting the budget review to Congress, Mr. Bush also gave some hints about spending and his war policy in the next few years. He projected needing $110 billion in emergency spending for the war in fiscal 2007, which begins Oct. 1, and $50 billion in emergency spending in 2008.

At $296 billion, the 2006 deficit would still be the fourth largest in dollar terms in the nation’s history. But as 2.3 percent of the gross domestic product (GDP), it is smaller than the deficits in 17 of the past 25 years.

It also puts the president ahead of schedule to cut the deficit in half by 2009, compared with where it was in 2004 when he made the vow.

At that time, the deficit was projected to reach $521 billion, or 4.5 percent of the GDP.

Mr. Bush said he is now on target to slice the deficit in half a year earlier.

“We’ll cut the deficit in half by 2008,” he said yesterday afternoon in Port Washington, Wis., while touring the Allen-Edmonds Shoe Corporation factory.

While some Republicans joined Mr. Bush at the White House yesterday, no Democrats were present for the announcement of the deficit news.

“Today’s news is not cause for complacency, much less celebration. We are not on a glide path to a balanced budget,” said Rep. John M. Spratt Jr. of South Carolina, the top Democrat on the House Budget Committee.

While he called the lower deficit figure “welcome,” Mr. Spratt said the nearly $300 billion shortfall is a swing of about $600 billion from the $300 billion surplus projected for 2006 when Mr. Bush took office in 2001.

And in addition to the deficit, which is the yearly shortfall, Mr. Spratt said Mr. Bush has also presided over a $3 trillion increase in the national debt, which is the accumulated amount owed by the federal government.

Ninety percent of the $127 billion reduction is due to increased revenues from economic growth, while just $6 billion is due to actual changes Congress made to reduce spending or increase tax receipts.

The good deficit news may be short-lived. Some lawmakers said the higher revenues are a bubble that will not last, and even Mr. Bush’s own figures show a higher deficit for fiscal 2007, at $339 billion. That’s not only $43 billion more than this year, it’s also a sizable increase from the projection of $233 billion that the administration made last year.

In its report to Congress, the administration included a section arguing for the success of Mr. Bush’s 2001, 2002 and 2003 tax-cut packages, pointing to a Treasury Department report that found that without the cuts, the economy could have had 3 million fewer jobs by the end of 2004, and the GDP could have been as much as 3.5 percent to 4 percent lower.

While touting the economic news, Mr. Bush yesterday also made another pitch for Congress to restrain spending and called for the Senate to follow the House’s lead and pass the legislative line-item veto.

Mr. Bush also made it clear yesterday that he is not giving up on reforming Social Security. His remarks were in line with other recent comments he has made signaling that, from his perspective, the issue is far from dead.

But Republicans on Capitol Hill said it is certainly not going to happen this year.

“I don’t see in an election year how we have the time or the will,” said Sen. John Cornyn, Texas Republican and a member of the Senate Budget Committee who does support reforming Social Security.

• Amy Fagan contributed to this report.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide