The federal deficit fell to a four-year low in the budget year that just ended, a result President George W. Bush pointed to Wednesday in claiming Republicans are better stewards of the economy than are Democrats.
The administration said the deficit dropped to $247.7 billion — welcome news for Republicans struggling to keep control of Congress. Bush boasted he had made good on a 2004 campaign promise to cut the deficit in half over five years.
“These budget numbers are proof that pro-growth economic policies work,” Bush said.
Democrats said the improvement in the 2006 federal deficit was a temporary blip. They predicted rising deficits for years to come unless policies are changed.
“Only a president with such a historically bad economic record would be this excited about a $248 billion deficit,” said Rep. Carolyn Maloney, a New York Democrat. “Under his watch ... record surpluses turned into record deficits as far as the eye can see.”
Republicans are trying to convince voters that the GOP champions tax cuts while Democrats will raise taxes if they gain control of Congress. Democrats contend the administration’s tax cuts have primarily benefited the wealthy.
“There’s a difference of opinion in the campaign about taxes,” Bush said, predicting that the Republicans still will lead the House and Senate after the Nov. 7 congressional and gubernatorial elections. “I would like to ... make the tax cuts permanent. And the Democrats will raise taxes.”
The administration credits its tax cuts for the improving economy, contending they helped the nation withstand the 2001 recession, the terrorist attacks and corporate accounting scandals. The deficit narrowed sharply because revenues climbed by 11.8 percent, outpacing a 7.4 percent increase in spending.
Administration officials said the actual 2006 deficit is down to 1.9 percent of the gross domestic product. They said that is below the 40-year average deficit of about 2.3 percent of the GDP, which measures the value of all U.S. goods and services. This continues a positive trend that comes despite soaring war costs and $50 billion in emergency spending for hurricane relief, they said.
Still, the long-term deficit picture is bleak.
The nonpartisan Congressional Budget Office projects that the deficit for the current budget year will rise to $286 billion. Over the next decade, the office forecasts that the deficit will total $1.76 trillion.
Bush’s critics argue that the White House is using sleight of hand when boasting about the deficit.
The president can rightly state that he has fulfilled his 2004 campaign pledge to cut the deficit in half by the time he leaves office. In fact, he can say he has done it three years early. But in making that claim, the president is using the administration’s original forecast of what the 2004 deficit was expected to be — not what it actually turned out to be.
Back when Bush made his promise, the administration was predicting that the 2004 deficit would be $521 billion. That prediction turned out to be off by $100 billion. To achieve the feat of slicing the actual 2004 deficit number in half, the federal deficit Bush was highlighting would have to have dropped to $206 billion, not $247.7 billion.
Democrats say the narrowing of the deficit will be temporary because when 78 million baby boomers retire, the cost of Social Security and the Medicare health care program for the elderly will soar.
“The fact that some are trumpeting this year’s deficit number as good news shows just how far we’ve fallen. Our budget picture is extremely serious by any measure,” said Sen. Kent Conrad, the senior Democrat on the Senate Budget Committee.
