WASHINGTON, 8 October 2006 — The US government budget deficit estimate for the fiscal year just completed Sept. 30 has dropped to $250 billion (197.4 billion euros), congressional estimators said Friday, as the economy continued to fuel impressive tax revenues.
The Congressional Budget Office’s latest estimate is $10 billion (7.9 billion euros) below CBO predictions issued in August and well below a July White House prediction of $296 billion (233.7 billion euros).
The improving deficit picture — President George W. Bush predicted a $423 billion (334 billion euros) deficit in his February budget — has been driven by better-than-expected tax receipts, especially from corporate profits, CBO said. The 2005 deficit registered $318 billion (251.1 billion euros); the record $413 billion (326.1 billion euros) deficit was posted in 2004. At $250 billion (197.4 billion euros), it would be the lowest since the $158 billion (124.7 billion euros) figure in 2002, the first deficit following four years of surpluses.
The CBO estimate continues a positive trend on the deficit after a grim deficit performance during Bush’s first term, and comes despite soaring war costs and $50 billion (39.4 billion euros) in emergency spending for hurricane relief.
House Budget Committee Chairman Jim Nussle credited the improving deficit numbers to “a responsible budget blueprint and pro-growth policies,” even as Democrats pointed out that at $250 billion (197.4 billion euros), the deficit is still one of the largest in US history. “Though today’s estimates for 2006 are not as pessimistic as some earlier estimates, it is clear that the budget remains on the wrong track,” said top budget panel Democrat John Spratt Jr. “The Congressional Budget Office and even the Bush administration are estimating that deficits will be even larger next year.”
White House budget chief Rob Portman said the economy’s current performance, with the unemployment dropping to 4.6 percent in September and the Dow Jones Industrial Average hitting record highs this week, provided more evidence that President George W. Bush’s economic policies are working. “This economy is strong and growing,” Portman told reporters at a briefing. “This is a very strong indication that the president’s tax relief program is working.” But when measured against the size of the economy, which is the comparison economists think is most important, the deficit picture looks even better.
At 1.9 percent of gross domestic product, the 2006 deficit registers far below those seen in the 1980s and early 1990s. The modern record of 6 percent of GDP came in 1983 and deficits greater than 4 percent in 1991 and 1992 drove Congress to embark on a 1993 deficit-cutting drive.
Still, the long-term deficit picture remains bleak due to the looming retirement of the Baby Boom generation, which threatens to swamp medical and social benefit programs for the elderly. The CBO estimates reflect actual government revenues and expenditures through August and estimates for September. The Treasury and the White House budget office are expected to release official deficit numbers next week.