Bush Administration Revises Deficit Projection for 2006

After claiming in July of 2005 that the spiraling federal budget deficits hallmarking the Bush Administration since its start would begin to narrow in 2006, the White House is now forecasting red ink exceeding $400 billion for the current year. In July, the Administration claimed expenditures would exceed revenues by $341 billion, but Joel Kaplan, the deputy director of the White House Office of Management and Budget, now says the deficit will be more than $400 billion, putting it in the range of the record-breaking deficit of 2004.

The White House claims the revision had to be done because of the costs of Hurricane Katrina. In what appears to have been a statement coordinated with the projected deficit revision, President Bush on Thursday said in a speech in the 8,000-member community of Bay St. Louis, Mississippi, that the federal government would spend a total of $85 billion on rebuilding projects along the Gulf Cost and that $25 billion had already been spent, leaving an additional $60 billion yet to be used. That $60 billion is exactly the amount by which the new projected deficit exceeds the previous forecast.

The new estimate of red ink comes on the heels of budget cuts already enacted by the Congress, and it challenges the vow of Administration officials to press for continuation of tax cuts—most of which were originally set to expire before 2010—put into place by the Republican-controlled Congress and the President during Bush's first term. As recently as last Saturday during his weekly radio address, Bush called for making the tax cuts permanent and went on to encourage legislators to cut the deficit by "...passing the first reduction in the growth of entitlement spending in nearly a decade." Seemingly dismissing the deficits his Administration and allies in Congress have overseen, he said, "The bigger challenge to our budget is long-term deficits driven by mandatory spending or entitlements." Some media and Democratic assessments describe the deficit reduction measures already well on their way to becoming law as election-year posturing to "burnish the credentials" of Republicans as deficit hawks.

In Congressional Budget Office projections updated November 4, 2005, the budget deficit for 2006 was forecast to be $314 billion, which is approximately $86 billion less than the White House is now indicating only two and a half months later. The graphic at left presents the November CBO figures for 2005 through 2010, augmented with the revision that has been provided by the Bush Administration, which is still claiming—although the CBO figures do not reflect this—that it will be able to halve the current deficit levels by the year 2009.

With continuing large federal budget deficits likely to put additional upward pressure on interest rates, and with the Republican-controlled U.S. government unwilling to pull back from tax cuts that even a government analyst testified were fueling shortfalls of federal revenues, the American economy is likely to experience a difficult year, particularly if the Congress uses the deficits to enact further cuts in programs unpopular with the neo-conservatives who now dominate policy making in Washington. And if the President continues to have natural disasters occur on his watch, he will have further opportunities to excuse massive federal budget deficits without mentioning the alternative, which would be to maintain the fiscal discipline of his immediate predecessor in the White House, whose budget surpluses could sustain the inevitable drawdowns for which a responsible government should plan before it contemplates tax cuts for its favored political constituencies.



The Dark Wraith will report further revised forecasts of government fiscal irresponsibility as they become available.