White House acknowledges ballooning deficit and pledges for the first time to cut it in half.
July 15, 2003: 1:16 PM EDT
WASHINGTON (Reuters) - The White House said on Tuesday the federal budget deficit would balloon to a record $455 billion this fiscal year after absorbing heavy costs from the war in Iraq, and then climb $20 billion higher in 2004, a presidential election year.
But the White House said the deficit would improve, pledging for the first time to cut it in half by 2006, though officials did not spell out how they would do so.
Democrats accused President Bush of using rosy economic assumptions to understate the magnitude of a budget gap approaching the half-trillion-dollar mark for the first time.
"President Bush is repeating two dangerous habits: Misleading the American people and ducking responsibility for his mistakes," said Democratic presidential hopeful Joseph Lieberman, a senator from Connecticut.
The White House countered that the 2003 and 2004 budget deficits -- 50 percent higher than the administration's own forecasts five months ago -- were "manageable" and reflected economic and national security priorities following the Sept. 11, 2001, attacks.
The new projections include initial costs from the war in Iraq as well as Bush's sweeping tax cuts.
"The deficit certainly remains a concern, but it is one that is manageable and it is one that we are addressing,"said White House spokesman Scott McClellan.
McClellan said the White House promised to "cut this deficit in half" by 2006. According to administration projections, budget deficits would narrow to $238 billion in fiscal 2006 and to $226 billion in 2008.
Military operations in Iraq and Afghanistan have cost roughly $4.8 billion a month -- $58 billion on an annual basis -- which is well over initial estimates.
These war costs, plus the weaker-than-expected economy and the tax cuts, forced the White House to revise its budget forecasts from February, when it expected a deficit of $304 billion for the current fiscal year and $307 billion next year.
Underscoring the sharp reversal in the U.S. fiscal position, White House and congressional analysts had as recently as 2001 predicted 10-year budget surpluses of up to $5.6 trillion. Many analysts now expect massive deficits through 2013.
Rising deficits have yet to become a major political issue outside Washington, but some analysts believe that will change if they keep climbing ahead of the 2004 presidential election.
"We are drifting into bigger and bigger deficits and what I find alarming is that neither party is willing to give up its political priorities to do anything about it," said Robert Bixby, executive director of the Concord Coalition, a balanced budget advocacy group.
At $455 billion, the new deficit would eclipse the previous record of $290 billion in 1992 when Bush's father was president.
The U.S. government enjoyed four straight years of budget surpluses between 1998 and 2001.
Democrats and some analysts say that when revenue from Social Security is set aside, the actual deficit could approach $600 billion, or 5.5 percent of gross domestic product, one of the highest since World War Two.
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