October 21, 2003

Democrats, White House Joust Over Deficit

Filed at 2:23 p.m. ET

WASHINGTON (AP) -- New Bush administration figures that show a record $374.2 billion deficit for the federal budget year that just ended prove that the president's economic policies have shoved the country in the wrong direction, Democrats say.

White House officials and their Republican congressional allies counter that the numbers show just the opposite: The economy is on the mend, even as deficit still has further up to go.

The political fencing, barely a year before the next presidential and congressional elections, came as the White House's Office of Management and Budget announced the final 2003 deficit figure Monday.

Because the figures were lower than the White House's July projection of $455 billion, administration officials cited it as evidence that their attempts to fortify the weak economy were working.

``The improvement in our budget picture since our forecast last July is an encouraging sign that the economic recovery is gaining momentum,'' said Joshua Bolten, President Bush's budget director.

Echoing that, Treasury Secretary John Snow said, ``Today's budget numbers reinforce the indications we have seen for some months now that the economy is well on the path to recovery.''

Bolten conceded, however, that worse fiscal numbers are on the horizon, estimating the gap for the new year ``will likely exceed $500 billion, even with the strengthening economy.''

That could become a political hazard for Bush and congressional Republicans. With federal budget years running through Sept. 30, next year's figure will be ready just weeks before Election Day 2004.

Democrats mocked the administration's sunny interpretation. They noted that last year's red ink was more than twice 2002's $158 billion, and surpassed the $290 billion record set in 1992.

``I'm somewhat amused to see them say they thought that was good news,'' said Sen. Kent Conrad of North Dakota, top Democrat on the Senate Budget Committee.

Some Democrats have accused the White House of purposely padding its deficit forecast last July to lay the groundwork for casting the final budget numbers as good news. Sen. Ernest Hollings, D-S.C., raised that question anew on Monday.

``We need to find out what kind of shenanigans caused the estimate to be so off, whether OMB deliberately estimated high numbers so everybody could jump for joy this week,'' Hollings wrote in a letter to Senate Budget Committee Chairman Don Nickles, R-Okla., requesting hearings on the inaccuracy of the administration's July projection.

Republicans have blamed the deficits on the recession and on the costs of opposing international terror. On Monday, Nickles called the new numbers encouraging, ``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 the government collected $26 billion more than the White House projected, for a total of $1.782 trillion.

The White House in July had assumed a $15 billion drop in tax collections because of ``revenue uncertainty.'' The drop never occurred.

Most of the rest was due to better-than-expected individual and corporate income tax collections, which could mean that a stronger economy is raising incomes. That translates to higher tax liability.

Spending for 2003 ended at $2.157 trillion, or $55 billion lower than the White House's July projection.

Though defense spending rose over 2002, its increase was $20 billion less than the White House estimated in July. Much of this was because the government spent its Iraq money more slowly than anticipated, Monday's report said.

Though that slower spending made 2003 look better, many of the expenditures will occur in 2004, making that year's shortfall worse.

Spending also was 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 hijacking attacks of Sept. 11, 2001.

``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 $450 billion. Therefore, we thank God.''

Bin Laden's remarks were translated by the U.S. government.