Even before the cost of Hurricane Katrina is added to the federal ledger, a Congressional Budget Office study commissioned by Democrats predicts President Bush will fail to keep his promise to cut the deficit in half by the time he leaves office.
The study by the nonpartisan CBO assumes that Congress will heed Bush’s call for new tax cuts and for making those passed in 2001 and 2003 permanent. It also assumes a big slowdown in spending on the Iraq war, tight caps on domestic agency budgets and new individual Social Security accounts.
The study was requested by Rep. John M. Spratt Jr., D-S.C., the top Democrat on the House Budget Committee. He says it reflects a likelier budget scenario than CBO’s official estimates, which do not foresee new tax cuts.
The study predicts that the $331 billion budget deficit projected for the current budget year would rise to $370 billion by 2009, the year Bush has promised to cut the deficit to at least $260 billion. Bush promised to cut the deficit in half from a projection in February 2004 of a $521 billion deficit for 2009.
By 2015, the deficit would hit $640 billion under CBO’s study.
“Under CBO’s new analysis of the Bush Administration’s policies, every vital sign of the budget grows decidedly worse over the next ten years,” said Spratt. “These new deficit figures show that the budget has deteriorated dramatically on this administration’s watch.”
In response, the White House asked for congressional action instead of rhetoric.
“Instead of complaining about the deficit, how about doing something about it?” said Bush spokesman Trent Duffy, noting that Spratt opposes Republican efforts to trim just $35 billion from federal entitlement programs over the next five years.
The White House Office of Management and Budget predicts the 2009 deficit at $162 billion, about 1 percent of the size of the economy.
“The federal budget picture is … is steadily declining out over the next five years … toward the President’s goal of cutting the deficit in half,” OMB Director Joshua B. Bolten said Wednesday. “I feel confident that we will remain on that path as long as we have continued good economic growth.”
Bolten says the cost of Katrina _ estimated by some Democrats to top $200 billion _ will affect the deficit in the next few years but not make it dramatically worse over the longer term.
Critics like Spratt say the White House underestimates or omits likely costs, such as the Iraq war and reconstruction and annual amendments to the alternative minimum tax so that it does not hit more upper middle-income taxpayers. The Congress invented the AMT _ which ensures that wealthy taxpayers pay at least some income tax _ in the late 1960s, but it was never tied to inflation, so more taxpayers pay it each year.
The White House says the AMT should be changed, as early as next year, in a big tax reform bill that does not raise taxes overall. That suggests other revenue hikes will have to make up for lost AMT revenue.
Spratt asked CBO to project deficits after incorporating Bush’s tax and spending policies into CBO’s baseline, extending recent AMT fixes and slowing Iraq spending from $85 billion next year to $35 billion by 2009.
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Congressional Budget Office: http://www.cbo.gov