Senate Democrats project deeper, longer budget deficit than White House

<br>WASHINGTON (AP) _ The federal budget deficit is going to be far worse and last longer than the White House projects, according to Senate Democrats who say President Bush's tax cut is to blame.

Friday, August 23rd 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ The federal budget deficit is going to be far worse and last longer than the White House projects, according to Senate Democrats who say President Bush's tax cut is to blame.

Republicans contend it is Democratic spending that most threatens the government's financial health as both sides blame the other for the vanishing budget surplus.

Using the president's own estimates for spending on such items as a Medicare prescription drug benefits, defense and education, Senate Budget Committee Democrats project deficits through 2008. Total red ink for the 2002-2011 period was pegged at $475 billion.

The White House last month estimated that the deficit _ about $165 billion this year _ would begin shrinking next year and return to a $53 billion surplus in 2005. A total surplus of $444 billion was projected for the decade.

The Democratic-run Budget Committee is projecting a deeper $190 billion deficit next year, with a more modest $27 billion surplus not occurring until 2009.

Sen. Kent Conrad, the Budget Committee chairman, said he expects similar estimates next week from the Congressional Budget Office, which provides the binding numbers lawmakers use to determine the bottom-line impact of spending and tax decisions.

The numbers released Thursday are the latest move in an election-year fight between Bush and Democrats over the evaporation of a once gigantic federal surplus, which was estimated at $5.6 trillion just 18 months ago if Social Security money is included.

Bush insists that despite a costly war on terrorism and a shaky economy, the federal budget can be balanced in relatively short order if Congress holds down spending. The president is refusing to release $5.1 billion of an anti-terrorism spending bill because, he contends, lawmakers added unrelated and unnecessary spending projects.

``This proves that Democrats are itching to raise taxes, which would wreck our economy and put more people out of work,'' said Trent Duffy, spokesman for the White House Office of Management and Budget. ``That's the wrong approach during these fragile economic times.''

But Conrad said an argument over such a small amount of spending pales in comparison with the budget impact of Bush's 10-year, $1.35 trillion tax cut, which Conrad said accounts for 40 percent of the reduced surplus over the decade.

``Despite the notable impact of the recession and the war on terrorism, there is simply no escaping the fact that the largest single factor causing the drop in surplus over the 10 years is the tax cut,'' said Conrad, D-N.D.

Conrad also criticized the White House for using overly optimistic assumptions of economic growth in its estimates, but he did not release the figures used by the Budget Committee in its calculations. Some Democrats have called for future parts of the tax cut to be frozen or rolled back, but Conrad did not join them.

Also Thursday, two economics scholars at the Brookings Institution, a liberal think tank, criticized tax cuts Bush is considering to boost investor confidence and spur economic growth. Among them is an increase in the $3,000 tax deduction for capital losses; an increase in contribution limits for 401(k)s and other retirement plans; and a reduction in taxes on corporate dividends.

Aside from the costs, which would add to the government's deficit woes, economists William Gale and Peter Orszag contended that none of the proposals would achieve the desired effect and would amount to a government bailout of people who took stock market risks.

``This pain, it's the downside of risk,'' Gale said.