President Bush’s budget would produce deficits totaling $2.75 trillion over the next decade, the Congressional Budget Office projected Friday in the first authoritative look at the plan’s longer-range implications.
The forecast — $737 billion worse than the budget office expects should Congress ignore Bush’s tax and spending plans — is sure to factor into this year’s presidential and congressional campaigns.
Bush sent lawmakers a $2.4 trillion budget for 2005 on Feb. 2, but it projected outward only for five years. The White House argues that longer-range forecasts are guesswork, but Democrats say the administration wants to hide future deficits that will career out of control as baby boomers begin to retire.
The preliminary analysis by the non-partisan budget office shows that Bush's fiscal plans would have little impact on the deficit forecast through fiscal 2010. But after that deficits would deepen severely under the new forecast, compared with the "baseline" projected before the latest budget proposal.
Bill Dudley, chief U.S. economist for Goldman Sachs, said the change is primarily a result of Bush's proposal to make permanent tax cuts passed over the past three years.
In fact the latest estimate from Goldman Sachs projects deficits totaling $5.5 trillion over the next 10 years, exactly double the CBO's latest projection. In addition to extending the tax cuts, Dudley assumes Congress will act to index the alternative minimum tax. The AMT, originally intended to prevent millionaires from avoiding income tax, currently affects 2.5 million taxpayers and will affect 25 million by 2009 if it is left untouched.
Dudley also assumes Congress will need to approve supplemental appropriations to pay for ongoping operations in Iraq and Afghanistan, which has been left out of the latest White House budget proposal.
Two days ago, Federal Reserve Chairman Alan Greenspan focused attention on the government’s long-term fiscal problems by suggesting cuts in Social Security benefits to ease cascading red ink. Members of both parties quickly disavowed benefit reductions.
Democrats, though, hope to use the prospect of massive, unrelenting shortfalls as a symbol of what they say is Bush’s mismanagement of the economy. Republicans blame the red ink on recession and the costs of war and terror and say Bush has focused his attention on those problems instead of balancing the government’s books.
Yet underlining their sensitivity to the deficit problem, six conservative senators sent a letter this week asking Senate Budget Committee Chairman Don Nickles, R-Okla., to produce a fiscal blueprint for balancing the budget in seven years. That would exceed Bush’s goal of halving shortfalls in five years.
Wary of the impact on deficits, Republican congressional leaders already have said they will not move this year on Bush’s proposal to extend the tax cuts, which is the pillar of his plan for strengthening the economy.
The top two Democratic presidential contenders, Sens. John Kerry of Massachusetts and John Edwards of North Carolina, have said they would roll back the reductions for the wealthiest Americans.
Just two years ago, the budget office and Bush envisioned surpluses totaling $5.6 trillion for the decade ending in 2011. The projections released Friday cover a slightly different period, the 10 years running through 2014. Even so, the contrast is striking.
MSNBC.com's Martin Wolk contributed to this report.
