Deficit will set record, says federal budget office

By Peronet Despeignes
Gannett News Service

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WASHINGTON — The federal budget deficit will reach $477 billion this year, the biggest shortfall ever in dollar terms, the Congressional Budget Office (CBO) said yesterday.

In the next 10 years, cumulative deficits are likely to add almost $2.4 trillion to the national debt, the CBO estimate said.

The forecast comes as Democrats campaigning to run against President Bush point out that he has turned a surplus into a deficit. It also shows the difficulty Bush faces in meeting his pledge last week to cut the deficit in half in five years.

The 10-year forecast contains a cumulative deficit nearly $1 trillion larger than the CBO projected less than six months ago. The increase is due mostly to the passage of a prescription-drug benefit for people on Medicare and a catchall spending bill.

Although budget deficits can help the economy in the short run by financing job-creation projects and stimulating consumer spending, economists warn they're dangerous if allowed to fester. Over time, heavy government borrowing competes with private-business borrowing and can drive up interest rates.

The CBO's latest figures suggest "it will be a very tough challenge" for Bush to cut the deficit while rebuilding Iraq, said William Hoagland, budget expert for Senate Majority Leader Bill Frist of Tennessee.

Critics are skeptical Bush can make good on his promise because he faces budget-busting difficulties:

• Congress would have to keep spending at or below the inflation rate, now about 1.9 percent. But there is enormous pressure for spending on popular programs such as highways.

• Bush is expected to request $40 billion more late this year to rebuild Iraq.

• Bush wants Congress to make his income-tax cuts permanent.

If nothing changes, the estimated budget deficit will shrink to $268 billion in 2009 and disappear in 2014. Otherwise, Hoagland said, the deficit will grow each year.

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