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White House projects higher budget deficit

Democrats fault administration's policies

White House projects higher budget deficit

From John King and Suzanne Malveaux
CNN Washington Bureau

WASHINGTON (CNN) -- The White House revised this year's federal budget deficit estimate upward to $165 billion Friday from an earlier $106 billion projection.

But numbers released Friday by the White House's Office of Management and Budget project the deficit will begin to shrink next year -- an outlook at odds with congressional budget experts, who project the deficit to grow again in fiscal 2003, which begins October 1.

With midterm elections on the horizon, the new numbers reignited the debate over why the government is back in the red after surpluses at the end of the Clinton administration.

The Bush White House blames a combination of a slowing economy, the costs of the September 11 terror attacks and the resulting war on terrorism, but Democrats say the Bush administration's $1.3 trillion tax cut also helped push the figures into the red.

Red ink blues 

"The deficit is going up exponentially ... This is a clear editorial on the fiscal policies of this administration," said Senate Majority Leader Tom Daschle, D-South Dakota. "I have said before that it was a disaster. I think the numbers today demonstrate why I believe that."

OMB Director Mitch Daniels said a significant factor behind the revised deficit estimate is a falloff in capital gains tax receipts as a result of the bear market.

"Revenues, tax payments to the federal government -- which generally rise and fall, historically have risen and fallen with the economy and with economic growth -- have been weaker than we expected. And this is due, apparently, almost entirely, to what I will call stock market-related income," Daniels said.

The OMB predicted the U.S. budget would move out of deficit and toward balance by 2005, assuming sustained economic growth and an adherence to Bush's fiscal policies -- tax cuts and moderate government spending.

The agency asserts that the path to getting out of the red, while still fully funding homeland security efforts and the war on terrorism, is to slow down the growth of government spending in all other areas from around 8 percent -- - a percentage seen for nearly 10 years -- to 2.6 percent.




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