Reply #3: Budget office refutes Bush deficit projections [View All]

http://news.ft.com/cms/s/6d708abe-6ef3-11d9-94a8-00000e2511c8.html

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The CBO said the deficit was likely to narrow only fractionally in 2005 from $412bn to about $400bn, if the estimated $30bn additional cost of operations in Iraq were included. The administration on Tuesday forecast an even higher deficit of $427bn for 2005, including the cost of extra funding for the war on terror.

The figures come ahead of what is expected to be a tough budget request to Congress from the White House next month. Congress and the president are expected to take action to prevent middle-class households from having to pay the Alternative Minimum Tax. This would cost about $500bn in 2006-15.

If these costs are added back the deficit rises to $477bn or 3.3 per cent of gross domestic product by 2009. In 2004 the deficit of $412bn was 3.6 per cent of GDP.

The outlook deteriorates still further after 2009 if Mr Bush succeeds in extending the tax cuts of his first term, which would cost about $1,854bn between 2006 and 2015, while plans to create private Social Security savings accounts would cost as much as $2,000bn over the first 10 years.

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