CQ TODAY PRINT EDITION
– BUDGET
Updated July 28, 2008 – 1:24 p.m.
Record Deficit Estimate Spurs Criticism and Finger-Pointing on Both Sides
By David Clarke, CQ Staff
Democrats used Monday’s release of new deficit projections to lambaste President Bush’s fiscal record as his term comes to a close, and even the Republican looking to replace him joined the election year chorus of criticism.
Other GOP lawmakers said there was plenty of blame to go around and pointed back at the Democrats for spending.
The Bush administration is now projecting a budget deficit of $482 billion in fiscal 2009 — a record high in dollar terms but not when looked at as a percentage of the economy, which economists say is the best way to measure deficits. The previous record in dollar terms was $412.7 billion in fiscal 2004.
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The new projection is also higher than the $407 billion the administration projected in February as part of Bush’s budget proposal. Administration officials said the difference is the result of the slowing economy and how the cost of the economic stimulus package (PL 110-185) enacted this year is being accounted for in the budget.
The fiscal 2007 deficit was $161.5 billion, and the fiscal 2008 shortfall is projected to be $389 billion, down from the $410 billion predicted earlier.
“The important point to remember is that near-term deficits are both temporary and manageable if, and only if, we keep spending in check, the tax burden low and the economy growing,” White House Budget Director Jim Nussle said during a news conference on the midsession review.
Democrats were quick to take the administration to task, arguing that Bush inherited surpluses when he became president in 2001 and now leaves his successor with the national debt heading toward $10 trillion, which is about $4 trillion more than when he took office. This “may be the administration’s last summation of its budget, and even though it gets to write its own report card, the grades are not good,” said House Budget Chairman John M. Spratt Jr. , D-S.C.
Even Sen. John McCain of Arizona, the Republicans’ presumed presidential nominee, sought to distance himself from the president’s fiscal record. “There is no more striking reminder of the need to reverse the profligate spending that has characterized this administration’s fiscal policy,” he said.
McCain supports extending the 2001 and 2003 tax cuts (PL 107-16, PL 108-27), but the cost of doing so, if not offset, would make balancing the budget difficult.
Sen. Barack Obama ’s presidential campaign also chimed in.“These have been years of unprecedented fiscal irresponsibility,” said Jason Furman, the top economic aide to Obama, D-Ill. Budget watchdogs have questioned whether Obama could implement all of his spending proposals, as well as provide tax breaks for the middle class, and still keep deficits in check.
Despite the volume of criticism from Democrats, the spike in the deficit also occurs as they control Congress. The economic stimulus package had bipartisan support, and the Congressional Budget Office projected it would cost $133.9 billion over five years, with most of that cost occurring in fiscal 2008 and 2009.
Since taking over Congress last year, Democrats also have not made any major effort to reduce deficits and the nation’s debt.
“Their failure to address energy prices and entitlement spending, coupled with their incessant push for billions in new spending, have contributed to this high deficit number,” said Sen. Judd Gregg , R-N.H., ranking member on the Budget Committee.
GDP Yardstick
When measured as a percentage of the economy, the new deficit projections are not exceedingly high. Deficits in the mid-1980s were in the 5 percent range. In that light, the fiscal 2008 figure is 2.7 percent of gross domestic product, and the fiscal 2009 figure is 3.3 percent of GDP.
But the rising deficit comes at a time when experts warn the federal budget is on an unsustainable path because of the growth in spending on major entitlement programs — Medicare, Medicaid and Social Security — that are being strained by the rising cost of health care and the retirement of the baby boom generation.
“It is already clear that whoever is elected president in 2008 will face crucial decisions about the path of our nation’s fiscal policy that go well beyond what may be needed to balance the budget in the short term,” said Robert Bixby, executive director of the Concord Coalition, a budget watchdog group.
The administration’s update shows the budget returning to a surplus of $58 billion by 2012, but it relies on questionable assumptions, such as only $70 billion more being spent on military operations in Iraq and Afghanistan after this year. It also assumes that preventing the alternative minimum tax from hitting more middle class taxpayers in the future will not cause the government to lose revenue. Democrats used similar assumptions to achieve balance by 2012 in the budget (
Nussle chided Democrats for not passing a single fiscal 2009 appropriations bill this year, even though the new fiscal year starts Oct 1.
Democrats have said they plan to pass a continuing resolution that would keep the government funded into next year, when a new president takes office, rather than engage in veto fights with Bush over the 12 annual spending bills.
Nussle declined to say whether the president would veto a continuing resolution that leaves final action until after he leaves office, noting that the White House has to see what the legislation looks like before making any decisions.
First posted July 28, 2008 10:55 a.m.
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