Jan. 23, 2002 - The Congressional Budget Office has reduced its estimate of the federal budget surplus over the next decade to $1.6 trillion from the $5.6 trillion

The new calculations led CBO to abandon its prediction last year that the national debt would be paid off within a decade. Instead, the budget office predicted that Congress will have to increase the debt ceiling within a few months.

The new calculations project the effects of current law and do not take into account congressional plans for more spending and tax cuts. Even without increases in spending on the military and homeland security, or an economic> <stimulus bill, the government is poised to run a $21 billion deficit in fiscal 2002 and a $14 billion deficit in 2003, CBO said.

Spending and tax programs proposed by President Bush could push the anticipated deficit to $100 billion.

A senior congressional aide said the president´s fiscal 2003 budget proposal will call for a 9 percent increase in overall discretionary spending, with defense winning a 12 percent increase. Spending on programs identified as protecting homeland security would be increased from $12 billion to more than $24 billion. The rest of discretionary spending would grow by 2 percent overall, or less than the rate of inflation.

Without new tax cuts or spending, the CBO expects the return of a surplus in fiscal 2004, although surplus Social Security revenue would be used to fund other government programs until 2010.  [As we "speak," Bush is trying to wipe out this deficit with more tax cuts for corporations....the plan is also going to screw most of the states.  Patriot]

Wednesday´s announcement triggered more partisan finger pointing, certain to carry into this year´s election campaigns, over who is responsible for the return to deficit spending.

Senate Budget Committee Chairman Kent Conrad, D-N.D., chided the president for putting too much faith in projections of record surpluses. "Unfortunately, he was wrong, and he was wrong by a country mile," Conrad said.  [Why don't the Dems tell the truth.  The man lied.  He lied from the get-go.  And he knew it.]

Democratic Sen. Debbie Stabenow, Mich., equated the deteriorating budget picture with the accounting scandal engulfing Enron Corp. and argued that upper-income Americans won generous tax cuts at the expense of middle-class retirement benefits provided by Social Security and Medicare.

Republican Sen. Phil Gramm, Texas, complained about a "spending orgy in the last three months of the last Congress." But Gramm also urged Budget Committee members to drop their ideological rigidity and negotiate a bipartisan fiscal 2003 budget resolution.

In the short term, CBO numbers show, the economic recession is primarily responsible for the budget´s decline from billions in surplus to a deficit.

But CBO attributes most of the dramatic decline of the 10-year, 2002-11 surplus to tax cuts and increased discretionary spending enacted last year.

Those two factors, combined with increased interest payments resulting from tax cuts and increased spending, account for 60 percent of the drop. The tax cut alone, without associated interest costs, accounts for $1.275 trillion of the missing $4 trillion surplus.  [Long-term interest rates won't drop because financial types know the deficit won't be paid down, and loan money will be going to the government rather than private investment.  GOP fiscal mismanagement means national debt interest costs will stay high.]

Increased spending accounts for $550 billion. Discretionary spending increased 13 percent in fiscal 2002 to $733 billion, from $649 billion the year before.

The remaining 40 percent of the lost 10-year surplus can be traced to the recession and related technical changes.

Looking at a 10-year window from fiscal 2003 to 2012, CBO estimates a $2.26 trillion surplus. Almost half of that total would be realized in the final two years of that decade - the period for which projections are most uncertain.  [It's a surplus that depends on Social Security and Medicare, both of which are disproportionately paid by the working poor and the lower middle-class.]

Source: CQ Monitor News

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