Congressional Budget Office predicts more years of budget deficits

<br>WASHINGTON (AP) _ Reduced tax collections, higher spending and a weaker economy all point toward federal budget deficits persisting for the next few years, congressional experts said Tuesday, a downbeat

Tuesday, August 27th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Reduced tax collections, higher spending and a weaker economy all point toward federal budget deficits persisting for the next few years, congressional experts said Tuesday, a downbeat assessment likely to resonate in the campaign for control of Congress.

Senior lawmakers from both parties quickly seized on the numbers, issued 10 weeks before the midterm elections, as evidence of the failings of the other.

House Budget Committee Chairman Jim Nussle, R-Iowa, said the new numbers, while not surprising, backed up GOP assertions that Democratic spending plans would ``send us down a path to much deeper deficits.''

His Senate counterpart, Democrat Kent Conrad of North Dakota, said the president's proposals for spending and tax cuts had ``driven us right back into the swamp of deficit and debt as far as the eye can see.''

The government will spend more than it collects in each of the next four years and will only move substantially back into the black if tax cuts enacted last year expire in 2010 as scheduled and there is no significant increase in spending, the Congressional Budget Office said.

Three months before the election, Republicans and the Bush administration said the numbers point to a need to restrain spending. Democrats said they reflect the long-term costs of the large tax cuts that President Bush pushed through Congress last year and are evidence that they should not be made permanent.

``Without the tax cuts, the budget would not invade the Social Security trust fund surplus over the 10-year period,'' said Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee.

The CBO projected that this fiscal year's budget deficit will hit $157 billion, the result of ``a sharp decline in tax revenues coupled with double digit growth in spending.'' It said the outlook for fiscal 2003, starting Oct. 1, was a budget shortfall of $145 billion, and that the federal ledger will only return to the plus side with a $15 billion surplus in 2006.

The White House last month put this year's deficit at around $165 billion.

The return of deficit spending this year, the first since 1997 and after a $127 billion surplus in fiscal 2001, is generally attributed to the fragile economy, the shaky stock market and the government's response to the Sept. 11 terrorist attacks. Democrats also blame the 10-year, $1.35 trillion tax cut that President Bush pushed through last year.

Mitch Daniels, director of the White House Office of Management and Budget, said the CBO report confirmed that the recession, the weak stock market and the war against terrorism caused the deficit. But he added that ``it does show a turn back toward balanced budgets with the right choices,'' including President Bush's efforts to revive the economy, fight terrorism and restrain spending.

The budget numbers are likely to become a factor in the upcoming elections, with the parties blaming each other for frittering away a budget surplus that only 18 months ago was estimated at $5.6 trillion through 2011 if Social Security money is included. It now appears inevitable that the government will have to dip into Social Security surpluses to pay for other programs, an action both parties have pledged to avoid doing.

The CBO said that if the tax cuts expire in 2010, the budget will return to substantial surpluses in the years 2010 through 2012 and that the government will be $1 trillion in the black over the 2003-2012 period.

Over that 10-year period, the CBO said, the general budget will record a $1.5 trillion deficit, compensated for by a $2.5 trillion surplus in the Social Security fund.

The Bush administration and congressional Republicans are pushing hard to make the tax cuts, which affect estate taxes and taxes on married couples, permanent.

The White House's Office of Management and Budget last month estimated the 2003 deficit at $109 billion, but said the government will return to a surplus of $53 billion in fiscal 2005 and record a cumulative surplus of $827 billion in the 2003-2012 period.

Those numbers are based on assumptions about future legislation, including more money for defense and making tax cuts permanent. Without those changes, the OMB sees the budget edging $1 billion into the black in 2004 and accumulating a $2.3 trillion surplus over 10 years, $1.3 trillion more than the CBO prediction.

The CBO projections assume current rates of spending, and do not include ambitious plans by the Bush administration to further increase defense spending or efforts by both parties to give seniors a prescription drug benefit.

The surplus projected over the next decade is nearly $1.4 trillion smaller than CBO estimated last March. The office said reductions in revenue estimates and hikes in spending were equally responsible for that change.