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'08 deficit could reach near-record $400B

And the outlook for 2009 doesn't look better. The U.S. record $413-billion deficit was in '04.

WASHINGTON - The budget President Bush unveils on Monday is likely to feature deficits reaching $400-billion this year and next.

The slowing economy is generating weaker tax revenues, which, combined with continuing war costs and the deficit-financed economic stimulus bill, will more than double the 2008 deficit from the $163-billion registered in 2007.

White House budget officials acknowledge that back-of-the-envelope calculations based on recent Congressional Budget Office data point to deficits in the $400-billion range this year and next. They acknowledge the CBO figures are a good indicator for where their own projections will be next week.

Such deficits would certainly create a challenge for Bush's successor, regardless of party. A $400-billion deficit would approach the record $413-billion tallied in 2004, putting pressure on presidential candidates to promise a fix.

Bush has promised a plan that would erase the deficit by 2012 if his policies are followed.

But to meet that promise will require Bush to propose politically difficult cuts to Medicare and Medicaid, virtually freeze domestic programs and leave out war costs and the cost of revising the alternative minimum tax so it does not trap more and more middle class taxpayers.

Economists say the best measure of the deficit is to compare it against the size of the economy. By that standard, a $400-billion deficit represents almost 3 percent of GDP. By contrast, President Bill Clinton was facing deficits in the 4 percent range when he felt compelled to tackle the issue in 1993.

The worst deficits were felt in the 1980s, topping at 6 percent of GDP in 1983.

[Last modified January 31, 2008, 01:56:24]