CBO projects deficit of $172 bil­lion in ’07

The Washington Times Weekly - - National - By Stephen Di­nan

The Con­gres­sional Bud­get Of­fice on Jan. 24 said this year’s fed­eral deficit will be $172 bil­lion, far smaller than last year’s tally, and that the bud­get is on track to be bal­anced by 2012 with­out any ac­tion or in­ter­fer­ence from Congress or the pres­i­dent.

But the CBO cau­tioned that the short-term num­ber doesn’t in­clude $30 bil­lion in ex­pected war costs, and that the long-term pic­ture is un­likely to ma­te­ri­al­ize be­cause it as­sumes gi­ant tax in­creases with the ex­pi­ra­tion of Pres­i­dent Bush’s 2001 and 2003 tax cuts and with the growth of the al­ter­na­tive min­i­mum tax. Congress and the pres­i­dent have promised to cut at least some of those taxes.

“When th­ese ad­just­ments are made, the es­ti­mates from CBO be­come a bleak re­minder of how much cur­rent pol­icy will need to be changed to re­turn the bud­get to a fis­cally re­spon­si­ble course,” said House Bud­get Com­mit­tee Chair­man John M. Spratt Jr., South Carolina Demo­crat.

The fig­ures set the stage for Mr. Bush, who will present his fis­cal 2008 bud­get early next month. That fis­cal year be­gins Oct. 1.

Rob Port­man, di­rec­tor of the Of­fice of Man­age­ment and Bud­get, said Mr. Bush will show a higher deficit in 2007 and dif­fer­ent pro­jec­tions for later years be­cause he makes dif­fer­ent as­sump­tions. Mr. Port­man said a key dif­fer­ence is that the ad­min­is­tra­tion’s bud­get will as­sume the tax cuts do not ex­pire.

Still, he said Mr. Bush’s bud­get also will show de­clin­ing deficits and a bal­anced bud­get in 2012.

“Congress should be en­cour­aged by this news, and I am opti- mistic that we can work to­gether — across party lines — to keep the econ­omy strong and spend tax­payer dol­lars wisely,” he said.

The good fis­cal news is thanks mostly to ex­tra­or­di­nary rev­enue growth, rather than spend­ing cuts.

Al­though Mr. Bush has touted a promised bal­anced bud­get by 2012, the CBO’s pro­jec­tions show the bal­ance would be achieved with­out any help from Mr. Bush — as long as he didn’t pro­pose deeper tax cuts or more spend­ing.

The CBO projects a $170 bil­lion sur­plus in 2012, af­ter a deficit of $12 bil­lion the year be­fore. The 2006 deficit was $248 bil­lion.

In 2011, the CBO projects, the fed­eral debt will peak at $5.4 tril­lion be­fore de­clin­ing as the bud­get comes into bal­ance.

House Ma­jor­ity Leader Steny H. Hoyer, Mary­land Demo­crat, said that how­ever good the news, it is still a long way from the huge sur­plus pro­jected for 2007 when Mr. Bush took of­fice six years ago.

“The re­al­ity is that this CBO pro­jec­tion rep­re­sents a $750 bil­lion de­te­ri­o­ra­tion in the bud­get out­look for fis­cal 2007 from the one Pres­i­dent Bush in­her­ited when he took of­fice,” Mr. Hoyer said.

The CBO re­port in­cluded a warn­ing about the long-term pic­ture, with the ag­ing pop­u­la­tion putting more stress on Medi­care, Med­i­caid and So­cial Se­cu­rity.

“Ei­ther a sub­stan­tial re­duc­tion in the growth of spend­ing, a sig­nif­i­cant in­crease in tax rev­enues rel­a­tive to the size of the econ­omy, or some com­bi­na­tion of spend­ing and rev­enue changes will be nec­es­sary,” the re­port con­cluded.

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