[FoRK] NYTimes.com Article: Deficit Study Disputes Role of Economy

jbone at place.org jbone at place.org
Tue Mar 16 08:29:51 PST 2004

Thanks to the unnamed reader who forwarded this to me.  I'm happy to be  
your mouthpiece.  :-)


Begin forwarded message:

Deficit Study Disputes Role of Economy

March 16, 2004

WASHINGTON, March 15 - When President Bush and his advisers
talk about the widening federal budget deficit, they
usually place part of the blame on economic shocks ranging
from the recession of 2001 to the terrorist attacks that

But a report released on Monday by the nonpartisan
Congressional Budget Office estimated that economic
weakness would account for only 6 percent of a budget
shortfall that could reach a record $500 billion this year.

Next year, the agency predicted, faster economic growth
will actually increase tax revenues even as the deficit
remains at a relatively high level of $374 billion.

The new numbers confirm what many analysts have predicted
for some time: that budget deficits in the decade ahead
will stem less from the lingering effects of the downturn
and much more from rising government spending and
progressively deeper tax cuts.

Administration officials do not dispute the basic thrust of
the agency's estimate, but they still say that faster
growth and spending restraints can reduce the deficit in
five years.

Though the economy is growing at more than 4 percent a
year, administration officials continue to attribute much
of the budget deficit to economic problems beyond their
control. "Large and unwelcome as they are, the deficits are
understandable," Treasury Secretary John W. Snow said in a
speech last week. "They are understandable in the sense
that the president inherited a recession and an economy
greatly weakened by the excesses of the late 90's."

President Bush and his advisers almost routinely cite a
list of shocks to the economy, from a recession that began
as Mr. Bush took office to the terrorist attacks and the
loss of investor confidence after a series of corporate

Joshua B. Bolten, director of the White House Office of
Management and Budget, summed up the burdens when he
presented Mr. Bush's latest budget proposal and predicted a
deficit of $521 billion for this year. "Like America
itself, the federal budget has faced extraordinary
challenges in recent years," he said, citing "a stock
market collapse that began in early 2000; a recession that
was fully under way in early 2001; revelation of corporate
scandals years in the making; and, of course, the Sept. 11
attacks and ensuing war on terror."

The Congressional report, though, concludes that the
"cyclical" problems of slower growth are a tiny part of the
overall budget problem. The Congressional agency estimated
that slower growth reduced tax revenues by $53 billion in
2002, accounting for a third of the budget deficit that
year. In 2003, the agency estimated that subpar growth cut
tax revenues by $68 billion. The overall budget deficit in
2002 swelled to $375 billion as a result of spending on the
Iraq war and Mr. Bush's tax cuts.

But this year, with the economy expanding, the
Congressional agency predicted that lingering weakness
would drain only $30 billion in tax revenues while the
deficit hits $477 billion, less than the White House had
forecast, but still a record.

Critics of the Bush administration said the new report
meant that budget problems were increasingly the result of
legislative changes, from higher military spending to
deeper tax cuts, rather than temporary economic distress.

"What the Bush administration has tried over and over again
to do is blame deficits on events outside their control,"
said Thomas S. Kahn, chief of staff for Democrats on the
House Budget Committee. "The C.B.O. report is confirmation
that the Bush administration has locked us into long-term
structural deficits that will take some very tough
decisions to wipe out."

But J. T. Young, a spokesman for the White House budget
office, said the administration was confident it could
reduce the annual budget deficit by half over the next five

Mr. Young cautioned that increases in tax revenues often
lagged behind increased economic growth, and he noted that
the budget was still being affected by higher costs for the
military and domestic security.

"The economic downturn was only one of the shocks," Mr.
Young said. "Even though the recession is over, we still
have to spend what is necessary in the war on terrorism."

Brian M. Reidl, a senior budget analyst at the Heritage
Foundation, a conservative research group, said control
over government spending would be crucial. He said the
agency report projected a 42 percent rise in spending from
1999 through 2005, but a tax revenue increase of only 19
percent. "Economic booms are not forever, but government
programs are," Mr. Reidl said. "In the absence of real
spending reform, the deficits are not going to go down."


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