Budget deficit sees dramatic improvement from 2004 record
By Associated Press
Published October 15, 2005
WASHINGTON - The federal deficit was $319-billion for the budget year just ended, down significantly from last year's record red ink - although a surge in Katrina-driven spending could drive it up again.
The improvement from the record $413-billion recorded in the 2004 budget year, which the Treasury Department reported on Friday, is largely due to a surge in federal revenues from an improving economy.
The figures were released three days before Congress returns from a recess and commences a struggle to cut $35-billion from federal benefit programs over the next five years to help defray hurricane recovery costs.
Despite the improvement, the 2005 shortfall was still the third-highest ever. The government's 2005 budget year ended on Sept. 30.
Because hurricanes Katrina and Rita hit in August and September, only about $4-billion of the $62-billion in emergency aid provided for the storms was spent in fiscal 2005. Congressional analysts figure another $30-billion of those funds will be spent in the budget year that began Oct. 1, though more spending could be approved in coming weeks.
The most recent White House estimate for the new fiscal year projects a $341-billion deficit, but that was issued before the hurricanes hit.
The $341-billion figure was an improvement from earlier deficit projections.
At the beginning of this year, the White House projected a $427-billion shortfall for 2005, which would have set another record in sheer dollar terms. The Congressional Budget Office forecast a gap of $365-billion, although both lowered their forecasts as the year progressed.
The improvements were due to a surge of 15 percent in federal revenues over 2004 levels. Meanwhile, spending went up 8 percent.
"Lower taxes and pro-growth economic policies have created millions of jobs and a growing economy that has swelled tax revenues over the past year," said Treasury Secretary John Snow. "While deficits are never welcome, the fact that we finished FY 2005 with a much lower-than-expected deficit is encouraging news."
The White House and most economists say the truest measure of the deficit is relative to the size of the economy. In those terms, the deficit measured 2.6 percent of gross domestic product. The 2004 deficit, by contrast, equaled 3.6 percent of GDP.
When President Bush took office in 2001, the White House projected a surplus for 2005 of $269-billion. However, the economy was rocked and spending priorities changed by the Sept. 11, 2001, terrorist attacks.
The White House has set a goal of cutting the deficit in half from the $521-billion prediction for 2004 that it issued at the beginning of that year.
The administration says it is on track to reach that goal by the time Bush leaves office.