Prometheus 6

Deficit Study Disputes Role of Economy

By EDMUND L. ANDREWS

Published: March 16, 2004

ASHINGTON, 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 year.

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. [P6: So could waving your hands really fast]

[Bullshit elided]

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.