WASHINGTON - The nonpartisan Congressional Budget Office presented a worsening budget picture yesterday, saying federal deficits over the next decade will total $2.75 trillion if Congress goes along with President Bush's new budget.
That's more than the $2.4 trillion Bush proposes to spend in the 2005 fiscal year federal budget and represents a stunning reversal from the large surpluses that had been anticipated when the president took office in 2001. The budget office said policies under the proposed Bush budget would enlarge the total 10-year deficit by $737 billion more than the CBO had estimated before the new budget plan was released.
The deficit has become a major political issue in the presidential race, and the new CBO numbers are expected to give Bush's critics more ammunition in their attempt to brand the president as fiscally irresponsible.
The report came on the heels of a statement by Federal Reserve Chairman Alan Greenspan that Congress should consider adjusting Social Security benefits and other federal spending to rein in a deficit he said would harm the economy by the time the baby boom generation retires.
Greenspan foresaw long-term deficits even larger than those projected by either the CBO or the White House, telling Congress he was concerned that the annual federal deficit could surge well beyond $500 billion at the end of the decade if nothing is done to curb the budget.
Sen. Kent Conrad of North Dakota, the top Democrat on the Senate Budget Committee, said yesterday that after baby boomers begin to retire in 2008, Bush's budget would take the country "right over a cliff into deficit and debt land that threaten not only Social Security, but Medicare and most of the rest of government as well."
The Congressional Budget Office's numbers, while large, are not quite as dire as either Greenspan or Conrad portrayed them.
In a report released to Republican Sen. Ted Stevens of Alaska, chairman of the Senate Appropriations Committee, the CBO laid out a 10-year projection showing that the budget using Bush's policies would remain deeply in the red throughout the decade. In 2014, the deficit would total $289 billion, the report said, with no end to the red ink in sight.
The CBO, respected by Congress as an authoritative arbiter on budget numbers, had projected a $2.01 trillion deficit over the next 10 years before Bush's budget plan came out. This previous projection had the annual deficit falling to $15 billion by 2014, virtually in balance.
Even the new numbers might turn out to be rosy. The budget office accepted the White House's assurance that federal discretionary spending, excluding defense and homeland security, would increase by no more than 1.8 percent in the next five years - an assumption that might not come to pass. Congress is fighting vigorously over proposed Bush budget cuts.
The White House has said that the deficit in fiscal 2004 - which ends Sept. 30 - would total $521 billion, and that the deficit would be slashed by more than half over the next five years from this number, as a result of higher economic growth and spending reductions.
By contrast, the CBO said the deficit this year would be $478 billion and then would fall to $258 billion in five years. But significantly, the budget office's new projections do not count emergency spending for Iraq over the next few years, nor do they take into account a proposal to prevent many middle-class taxpayers from paying more taxes in the next few years under an obscure levy known as the alternative minimum tax.
That's because the Bush budget did not fully deal with the cost of these two items.
The Bush budget contains only a one-year "fix" for the alternative minimum tax, a levy originally designed to prevent wealthy Americans from escaping taxation. Increasingly, because of higher incomes, the alternative minimum tax will begin to force middle-income people to pay higher taxes. Fixing the problem could cost hundreds of billions of dollars over 10 years, tax analysts say.
When Bush presented his budget to Congress, he projected deficits for only five years, prompting his critics to say the White House was attempting to hide a 10-year deficit that was much worse. The White House said 10-year budget projections are inaccurate and should not be made to the public.
The deficit has become an issue not only with Democrats but also with the conservative wing of the Republican Party, which has urged Bush to take a harder line on spending.
The Chicago Tribune is a Tribune Publishing newspaper.