Bush Seen Projecting Record Deficit

Tue Jul 27, 2004
By Anna Willard and Caren Bohan

WASHINGTON (Reuters) - The White House is expected to project soon a record federal budget deficit of about $420 billion for 2004, which could give ammunition to both sides of the election-year debate over tax and spending policies.

Congressional sources said on Tuesday the White House review of the current fiscal year, which ends Sept. 30, was likely to project a deficit about $50 billion greater than 2003. But the new figure would be nearly $100 billion less than forecast five months ago.

A congressional aide who spoke on condition of anonymity said the $420 billion figure is "what people are talking about" on Capitol Hill. Others gave a similar figure, which would be a record in dollar terms.

White House budget office spokesman Chad Kolton declined to discuss specific projections but said the office had not yet briefed anyone at the Capitol on details of the review.

Republicans have said privately that they would view a better-than-expected projection as a sign of progress toward President Bush's goal of cutting the deficit in half in five years.

But the campaign of Democratic presidential candidate Sen. John Kerry ridiculed the prospect of portraying a $420 billion deficit projection as good news.

"It takes a lot of chutzpah," said Gene Sperling, a former economic aide to former Democratic President Bill Clinton and now an adviser to Kerry.

"There was supposed to be a $400 billion surplus this year," Sperling said, referring to Clinton-era projections. "That is an $800 billion deterioration and they are trying to brag about it."

The president has been accused of recklessness by Democrats who blame his huge tax cuts for the red ink. Bush has cited a recession and the aftermath of the Sept. 11, 2001, attacks, including wars in Afghanistan and Iraq.

The White House is expected to issue the new budget projection as early as this week. It was originally due on July 15, but the White House Office of Management and Budget sought extra time to update its figures in light of improving economic conditions that have fueled higher tax revenues.

The Iraq war, however, has cost more than anticipated.

The president's budget request in February for fiscal 2005 forecast a $521 billion shortfall for 2004. The deficit of $374 billion in 2003 was a record.
The administration is wary of unveiling the budget projection during this week's Democratic convention, at which Kerry, of Massachusetts, is to accept the party's nomination to challenge Bush for the presidency.

Bush has been keeping a low profile during the convention, which ends on Thursday. If the report were to come out this week, Friday would be the most likely day for it. But it could also be delayed until at least next week. Kolton said the timing depends on when the figures are finalized.

The budget update comes as the Bush campaign is working to devise new initiatives for a second-term agenda that the president will roll out when he hits the campaign trail in earnest next month in the run-up to the Republican convention.

Conservative Republicans are pressing Bush to make an overhaul of Social Security a key campaign theme. But some Republicans said the anticipated large cost may weigh against giving it heavy emphasis in the campaign.

The head of the nonpartisan Congressional Budget Office, Douglas Holtz-Eakin, said last week he expected the budget shortfall to come in at less than $450 billion.

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