White House predicts record deficit

From wire reports

The Bush administration dramatically raised its budget deficit projections on Tuesday to $455 billion for this year and $475 billion for next. The prediction of all-time record levels set Republicans and Democrats at each other's political throats over an issue the public has largely ignored in recent years.

The figures surpass the $290 billion shortfall of 1992 that has been the highest deficit until now. They also mark a deterioration by more than 50 percent since February.

White House officials and GOP lawmakers said congressional spending must be controlled and economic growth policies like tax cuts should be continued. They said President Bush has had other, more pressing concerns.

Democrats in Congress and on the campaign trail linked the unprecedented red ink to what they call Bush's mismanagement of the economy. Former House majority leader Rep. Richard Gephardt, D-Mo., a presidential candidate, called the deficit numbers a result of Bush's "abysmal and poor" economic record.

White House officials called the projected $455-billion federal budget deficit manageable and fleeting, brushing aside charges that the record amount of red ink was an indictment of the president's economic and fiscal policies.

Joshua B. Bolten, director of the White House Office of Management and Budget, also predicted that the sweeping tax cuts enacted since Bush took office would help spur an economic recovery that would halve the deficit by 2006.

Still, the new deficit projection may complicate prospects for a Medicare prescription drug benefit or an expansion of tax relief for low-income families.

It is the latest in a series of worsening forecasts that have led Bush and his fellow Republicans to shelve past campaign promises to keep the budget in balance. The new report poses a fresh test of the GOP's willingness to put aside conservative orthodoxy and argue that reducing the deficit should take a back seat to other priorities at a time of war and economic slowdown.

There were some signs that Republicans were finding it more difficult to sustain that argument. "It is significantly higher than we anticipated," Senate Majority Leader Bill Frist, R-Tenn., said of the deficit. "It is high. It is too high."

Yet neither the White House nor Republicans in Congress have proposed any major change in fiscal course to cut the deficit. Rolling back recent tax cuts is a nonstarter. The year's appropriations bills are expected to continue moving through Congress at previously set levels.

Still, the growing deficit could make the climate less favorable to Bush's plan to establish a prescription drug benefit under Medicare.

"It doesn't come at a good time," a senior House GOP aide said of the deficit report. "There is some consternation about how these numbers will play out in Medicare."

The deficit could give new fuel to Republicans who have objected to the cost of a Medicare prescription benefit.

Concerns about the deficit also may make it harder for House and Senate Republicans to agree on a compromise to expand tax relief for low-income families with children.

The deficit also could undercut bipartisan support Congress has given to Bush's requests for increased security and defense spending.

Some Republicans worry that concern about growing deficits could undercut public support for Bush's stewardship of the economy.

"Democrats are trying to frame it in terms of the deficit," said David Winston, a Republican pollster. "If the economic discussion happens in the context of the deficit, it's a problem."

One measure of the political sensitivity of the issue was the lengths to which Bolten went to explain the findings of what is often a routine midyear economic report.

Although the new deficit estimates easily top the previous record of $290 billion set in 1992, Bolten argued that it is more important to focus on the deficit as a percentage of the gross domestic product to assess its impact on the economy. By that measure, the deficit has remained steady at 4.2 percent of the economy, he said, a level well below the post-World War II deficit peak of 6 percent of the economy in 1983.

Bolten also said that after 2004, the deficit would begin to decline rapidly. He predicted the deficit would be cut in half by 2006, and the deficit as a percentage of GDP would be 1.9 percent.

Tax cuts' role

He claimed that the three Bush tax cuts did not create the deficit problem but instead cushioned the economic downturn -- and will help reduce the deficit in future years by stimulating economic growth.

Democrats dismissed predictions that the deficit number would drop in a few years without a drastic change in fiscal policy. "This number today, as shocking as it is, is the tip of the iceberg," said Conrad, who predicted exploding deficits just as the baby boom generation retires.

Republicans chided Democrats for supporting spending increases that they said have done more to create the deficits than the tax cut has. House Budget Committee Chairman Jim Nussle, R-Iowa, said the deficit report provided a powerful new argument for Congress to stick to the spending ceiling it has set for the year's 13 appropriations bill.