Revenue Surge Shrinks Deficit; Tax Cuts 'Working,' President Says, but Some Voice Caution
The federal budget deficit will slip to $333 billion this fiscal year, from $412 billion in 2004, as a surge of unanticipated tax receipts pushes the red ink significantly below levels projected just five months ago, White House officials said yesterday.</br></br>The midyear budget forecast also shows that President Bush is on track to reach his goal of halving the deficit a year before his deadline of 2009. By 2008, the White House forecasts that the deficit will fall to $162 billion, or 1.1 percent of the gross domestic product (GDP). A slight rise projected for 2010 reflects the initial cost of Bush's proposal to add private investment accounts to Social Security.</br></br>"It's a sign that our economy is strong, and it's a sign that our tax relief plan, our pro-growth policies, are working," Bush said after a Cabinet meeting at the White House.</br></br>In dollar terms, the 2005 deficit of $333 billion would still be the third highest on record. That figure relies on the expenditure of about $173 billion in surplus Social Security taxes that must be repaid when baby boomers enter their retirement years. Sen. Jim DeMint (R-S.C.) called the deficit numbers "misleading" because "Congress is raiding Social Security to mask the true size of the deficit," which he says should be more than $400 billion.</br></br>But the change from February's projections is dramatic. Then, the White House foresaw a record deficit of $427 billion, equal to 3.5 percent of the GDP, for the fiscal year ending Sept. 30. Under that forecast, the deficit would have risen for the fourth straight year, from the $128 billion surplus Bush inherited in 2001. Now, the deficit is expected to finally begin receding, and it would come in at 2.7 percent of the GDP, smaller in those terms than the deficits of 15 of the past 25 years.