Print

Email story

Comment

Email editor

Report: Good news on budget deficit

By TIMES WIRES
Published January 25, 2007

WASHINGTON - The federal budget deficit is showing improvement, but President Bush might not be able to both balance the budget within five years and get Congress to extend his tax cuts, estimates released Wednesday by the Congressional Budget Office suggest.

The new forecast from the CBO put the deficit for the current budget year reaching about $200-billion after factoring in Iraq war costs. Last year's deficit was $248-billion.

Both the White House and top Democratic budget writers welcomed the improved outlook, but disagreements remain over how to close the gap.

The CBO, a nonpartisan agency that provides lawmakers with estimates of the budget and the costs of legislation, said the budget could run a $170-billion surplus in the 2012 fiscal year.

That figure, however, assumes Congress will let Bush's tax cuts expire at the end of 2010, effectively raising taxes on income, inheritances, married couples and parents.

The Bush administration releases its budget Feb. 5 and promises it will be balanced by 2012 without any such tax increases. The president committed himself to doing so in Tuesday's State of the Union speech. "We must balance the federal budget," he said. "We can do so without raising taxes."

White House budget director Rob Portman met on Capitol Hill with a group of moderate House Democrats and said the lawmakers are allies in the president's effort.

"This notion that you have to raise taxes to achieve balance ... is no longer the environment or the scenario," Portman told reporters.

He said Bush's budget would achieve balance with improved but still "cautious" estimates of tax revenues. They probably will be more optimistic than the CBO's estimates.

Extending Bush's tax cuts would swamp the projected surplus for 2012 with $425-billion in lost revenues and interest costs, according to CBO figures.

Last July, the White House predicted a $339-billion deficit for 2007. The CBO's new director, Peter Orszag, made his $200-billion prediction by combining the agency's baseline deficit of $172-billion with about $25-billion in additional war spending.

Bush is expected to send Congress a request for about $100-billion for Iraq and Afghanistan, but only $25-billion will actually be spent before the Sept. 30 end of the current budget year.

[Last modified January 25, 2007, 01:38:44]