The Washington Post

January 27, 2002, Sunday, Final Edition

SECTION: A SECTION; Pg. A03

White House Expects Deficits For the Rest of Bush's Term

by Gene Kessler

The federal government is projected to run a $ 106 billion deficit this year, the White House said, confirming the sharpest turnabout in the nation's fiscal health in half a century.

White House Budget Director Mitchell E. Daniels Jr., briefing reporters as congressional budget analysts delivered equally gloomy news on Capitol Hill, said the budget would be in deficit for the rest of President Bush's current term and then would emerge back into surplus the rest of the decade.

The surplus in the near-term has evaporated largely because the recession has lowered tax revenue and led to increased social services spending. The war on terrorism, meanwhile, has added billions of dollars of spending to the military and homeland defense budgets. But the Congressional Budget Office forecast suggested that the government would have eked out a small surplus this year absent the president's tax cut. Democrats charged that Bush's tax cut is largely responsible for the startling long-run decline in what, only a year ago, appeared to be more than $ 5 trillion in surpluses.

The White House last year had said that its budget would not touch Social Security payroll taxes to fund other parts of the government and was designed to pay down $ 2 trillion of federal debt by 2010. But the new projections suggest that Social Security funds will be tapped for other programs through the rest of the decade, with little prospect for significant debt reduction.

The CBO's forecast assumes no changes in policy, with spending growing at the rate of inflation, giving lawmakers "a baseline" with which to compare the budgetary impact of various proposals. Under this standard, the CBO estimated Wednesday that the budget deficit would be $ 21 billion this year and $ 14 billion in 2003.

But Congress and the administration have already promised to add billions to aid farmers, bolster homeland security and fight the war on terrorism. Such spending is not reflected in the CBO forecast.

The new White House projections include those policy initiatives, which is why the White House deficit figures are much higher.