22 October 2003

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US deficit hits record high of USD374.2 billion

The US federal deficit soared to USD374.2 billion in 2003, the White House said Monday, a record total that more than doubled last year's red ink and looked like a prelude to even gloomier numbers.
Because the shortfall marked an improvement from a USD455 billion projection the White House made in July, Bush administration officials cited it as evidence that their attempts to fortify the weak economy were working.
"Today's budget numbers reinforce the indications we have seen for some months now: that the economy is well on the path to recovery," US Treasury Secretary John Snow said.
White House budget director Joshua Bolten said much the same but also conceded that worse fiscal numbers were on the horizon, estimating the gap for the new year "will likely exceed USD500 billion even with the strengthening economy." Bolten said spending restraint and policies aimed at bolstering the economy can wrench the budget onto a course to halve deficits by 2009.
Even so, next year's figure could become a political concern for President Bush and Republicans in Congress. With federal budget years running through 30 September 30, next year's figure will be ready less than a month before elections that will see Bush’s Republican party fighting to retain control of the White House and Capitol Hill.
Democrats mocked the administration's sunny interpretation and tried to focus attention on the numbers for the budget year just ended. They noted that last year's red ink was more than twice 2002's USD158 billion, and surpassed the USD290 billion record set in 1992.
As they have done since four years of annual surpluses under President Clinton abruptly degenerated into deficits under Bush, Democrats blamed the Republican president for the reversal.
Some Democrats have accused the White House of purposely padding its deficit forecast last July to lay the groundwork for casting the final budget as good news. One raised that question anew on Monday, when it became clear the actual 2003 deficit was USD81 billion less than the administration projected three months ago.
Republicans have blamed the deficits on the recession and on the costs of opposing terrorism. On Monday, Nickles called the new numbers "encouraging" and "a sign that the president's economic plan is beginning to have an impact."
About one third of the improvement since the July estimate was because actual revenue collections totalled USD26 billion more in 2003 than the White House projected, for a total of USD1.782 trillion.
Part of that improvement was because in July, the White House assumed a USD15 billion drop in tax collections because of "revenue uncertainty" — a drop that never occurred.
Most of the rest was due to better than expected collections of individual and corporate income taxes - improvements that could mean that a stronger economy is raising peoples' and companies' incomes, which translates to higher tax liability.
Spending for 2003 ended up at USD2.157 trillion, which was USD55 billion lower than the White House's July projection.
Though defence spending rose over 2002, its increase was USD20 billion less than the White House estimated in July. Much of this was because the government was spending its Iraq aid more slowly than anticipated, Monday's report said.
Though that slower spending made 2003 look better, many of the expenditures will actually occur in 2004, making that year's shortfall worse.
Spending was also below White House expectations for a wide range of other programs, including interest on the federal debt, farm payments and homeland security.
Even Osama bin Laden jumped into the discussion, based on last July's White House estimate.
In an audiotape broadcast Saturday by the al-Jazeera television network, the al-Qaida leader lauded reversals he said the United States had suffered since the terrorist attacks of what has become known as 9/11.
"They also witnessed a budget deficit for the third consecutive year," bin Laden said, erroneously referring to the two straight shortfalls now recorded. "This year's deficit reached a record number estimated at USD450 billion. Therefore, we thank God."
Bin Laden's remarks were translated by the US government.
The nonpartisan Congressional Budget Office estimated last week that the 2003 deficit would be USD374 billion, based on Treasury Department data.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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