Federal Deficit Likely To Soar Beyond $100 Billion

June 15, 2002
By ALAN FRAM, Associated Press Writer

WASHINGTON - The federal deficit probably will soar beyond $100 billion this year, Congress' top budget analyst says, escalating a problem that both parties hope to capitalize on in this November's elections.

In its latest monthly review of Treasury Department data, the Congressional Budget Office said Friday that this year's shortfall should "end up well above $100 billion." The red ink for the fiscal year running through Sept. 30 would be the first since 1997.

Dan Crippen, director of the nonpartisan office, said the shortfall could near $150 billion. That is similar to expectations of Republican and Democratic analysts and of private forecasters.

Crippen blamed the worsening budget picture on an equal mix of rising spending, declining revenue and the added interest the government would have to pay to cover the resulting extra borrowing.

"Things are not getting a lot worse, but things are not recovering relative to what would be a more normal level for economic activity," he said at a briefing for reporters.

With elections for control of the House and Senate less than five months away, Democrats are using the returning deficits to blast President Bush's tax cut of last year. Republicans are citing it as proof of the need to control spending.

The fiscal year that ended Sept. 30 saw a $127 billion surplus, the second largest ever.

As recently as March, the budget office foresaw a surplus this year of $5 billion, but that was before a tax-cutting economic stimulus package and a farm bill became law. Also not factored in was a roughly $30 billion anti-terrorism package Congress is debating.

In its report, the budget office said the deficit for the first eight months of fiscal 2002 was $149 billion. A year earlier, there was a $137 billion surplus for the same period.

In May alone, revenues were $24 billion lower and spending was $30 billion higher than they were in May 2001, the budget office said. Most of the revenue decline came from lower collections of individual income taxes.

In March, the budget office projected the cumulative surplus from 2003 through 2012 would total $2.38 trillion. With rising spending and reduced revenue, however, that figure now looks likelier to fall between $1 trillion and $2 trillion, Crippen said.

He said annual surpluses could return by 2005 or 2006, which is later than Bush administration officials are hoping. To do that, lawmakers would have to refrain from new spending for prescription drugs, counterterror or other initiatives, which seems unlikely.

In an interview this week, White House budget chief Mitchell Daniels declined to predict how large this year's deficit will be.

He said that while the economy is doing better than administration officials predicted, revenue collections are lower. He blamed that largely on weak performance by the stock market, which during its boom of the late 1990s provided huge amounts of federal revenue from taxes paid on stock options, bonuses and other forms of earnings.

"At this stage, we're not getting even the revenues we'd expect," he said.

On the Net: Congressional Budget Office: http://www.cbo.gov/
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