Federal deficit hit record $413 billion in 2004
WASHINGTON -- The federal deficit surged to a record $413 billion in 2004, the Treasury Department announced Thursday, injecting the figure into a presidential campaign in which the two parties have clashed over President Bush's management of the economy and the budget.
The number was a significant improvement from the shortfalls that analysts projected earlier this year, including a $521 billion estimate the Bush administration made in February. In March, the nonpartisan Congressional Budget Office estimated a deficit of $477 billion.
Both the administration and the Congressional Budget Office had lowered their deficit forecasts as the year progressed, due to stronger than expected revenue collections and lower spending.
Even so, the final deficit figure easily surpassed the previous record in dollar terms -- a revised $377 billion deficit that was run up last year. The government's 2004 budget year ran through Sept. 30.
Changes in data
In a statement, Treasury Secretary John Snow cited improving economic data and said the budgetary improvement shows Bush is on track to cut the deficit in half over five years as he has promised.
"All of this shows that the president's tax relief initiatives are having the intended effects," Snow said.
"There is simply no credible way to present the largest deficit in history as good news," said Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee. "The Republicans control the House, the Senate and the White House, but today's news proves again they have failed to control the budget."
The government spent $2.292 trillion last year and collected $1.88 trillion in revenue, the Treasury Department said.
The administration and congressional Republicans have discounted the significance of a deficit of this magnitude.
They say the more important measure is that the 2004 shortfall was an estimated 3.6 percent the size of the economy, well below the worst-ever 6 percent figure set in 1983 under President Reagan.
Many economists agree that comparison is more significant because it shows how affordable the deficit is for the nation. But many of them are uncomfortable with shortfalls of that size because the deficits are expected to worsen later this decade when the huge baby boom generation begins drawing on Social Security and Medicare.
The Treasury released the final deficit figure the same day it announced that the government has begun using accounting procedures to avoid hitting the $7.4 trillion national debt limit.
Snow made that announcement in a letter to Congress. Lawmakers have yet to pass legislation needed to boost the government's borrowing authority, which now stands at a statutory limit of $7.4 trillion.
"Given current projections, it is imperative that the Congress take action to increase the debt limit by mid-November," when "all of our previously used prudent and legal actions to avoid breaching the statutory debt limit will be exhausted," Snow wrote House and Senate leaders of both parties.
When the government runs an annual deficit, it must borrow money to finance its operations, driving its accumulated debt ever higher.