Bush budget would produce deeper deficit than he projects, congressional analyst says

WASHINGTON (AP) _ President Bush's budget would dig a deeper deficit next year than the White House claims and tap $1.8 trillion in Social Security surpluses for other programs over the next decade,

Wednesday, March 6th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ President Bush's budget would dig a deeper deficit next year than the White House claims and tap $1.8 trillion in Social Security surpluses for other programs over the next decade, Congress' top fiscal analyst said Wednesday.

Both political parties immediately drew the nonpartisan Congressional Budget Office's report into their election-year fight over Bush's plans to cut taxes and boost spending for defense and domestic security.

Democrats said the analysis underlined the need to ``restrain spending and tax cuts,'' while Republicans said it showed the budget's condition will improve as the recession fades.

``You bring us rather good news,'' Sen. Pete Domenici, R-N.M., told CBO Director Dan Crippen, who presented his agency's report to the Senate Budget Committee.

Though the economy has shown signs of regaining strength, Crippen said Bush's budget would create a deficit next year of $121 billion _ $41 billion worse than Bush has projected. The chief difference is that CBO believes the government will collect less revenue next year than the White House has forecast, Crippen said.

Bush's proposal _ which Congress is only beginning to work on _ would begin generating annual surpluses in 2005, yielding a total surplus of $681 billion from 2003 through 2012, the report said. The figures assume the president's tax and spending plans become law.

That is in contrast to Bush's estimate of a $1 trillion 10-year surplus. The major discrepancy is that CBO believes Medicare spending will be higher than the White House has estimated.

The report also predicted a $90 billion deficit under Bush's budget for fiscal 2002, which runs through next Sept. 30. The White House has estimated this year's deficit at $106 billion. Either figure would end a string of four straight years of surpluses.

Democrats focused their fire on the report's forecast that $1.8 trillion in Social Security surpluses would be used to help pay for other programs over the coming decade.

Citing the costs of war, recession and terrorism attacks, Bush has said he has little choice but to generate federal deficits and tap Social Security surpluses. Democrats say diverting Social Security money will make it harder to shore up the giant pension program for the elderly and handicapped.

Calling such a course ``simply unsustainable,'' Budget Committee chairman Kent Conrad, D-N.D., said, ``We have got to restrain spending and tax cuts if we're to prepare for what's to come.''

A few Democrats _ but not Conrad _ have called specifically for blocking parts of last year's $1.35 trillion, 10-year tax cut from taking effect.

Republicans say such a move would be a tax increase and would roll back a plan that has helped revive the economy. Many Democrats say the tax cut is the chief reason projections of massive surpluses have vanished.

Conrad, who is writing a budget he hopes to push through his committee this month, has said his plan would require Congress to vote on whether it wants to use Social Security surpluses. Lawmakers could propose any spending cuts or tax increases to prevent that from happening, he said.

The Congressional Budget Office projected small surpluses of $5 billion this year and $6 billion in 2003 as the starting point for this year's budget fight, before any tax cuts or spending increases are enacted.

In January, CBO forecast deficits of $21 billion this year and $14 billion in fiscal 2003, without any tax or spending changes. That was before signs emerged of the economic rebound.

The difference between surpluses and deficits of that magnitude are nearly insignificant in a $2.1 trillion federal budget and a $10 trillion U.S. economy. But the new estimates may well add political momentum to House Republicans hoping to produce a 2003 budget they would say is balanced.

To make that claim, they will have to exclude the $77 billion price tag of an economic stimulus bill that Bush has proposed. The measure has stalled in the Democratic-controlled Senate.

Even so, keeping the budget balanced will be hard. Added spending for defense and homeland security is a virtual certainty, and there is wide support to boost funds for farmers and schools.