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Congressional estimators say budget deficit drops to $250 billion (euro197.4 billion)

Congressional estimators say budget deficit drops to $250 billion (euro197.4 billion)

The U.S. government budget deficit estimate for the fiscal year just completed Sept. 30 has dropped to $250 billion (euro197.4 billion), congressional estimators said Friday, as the economy continued to fuel impressive tax revenues.
The Congressional Budget Office's latest estimate is $10 billion (euro7.9 billion) below CBO predictions issued in August and well below a July White House prediction of $296 billion (euro233.7 billion).
The improving deficit picture _ President George W. Bush predicted a $423 billion (euro334 billion) deficit in his February budget _ has been driven by better-than-expected tax receipts, especially from corporate profits, CBO said.
The 2005 deficit registered $318 billion (euro251.1 billion); the record $413 billion (euro326.1 billion) deficit was posted in 2004.
At $250 billion (euro197.4 billion), it would be the lowest since the $158 billion (euro124.7 billion) figure in 2002, the first deficit following four years of surpluses.
The CBO estimate continues a positive trend on the deficit after a grim deficit performance during Bush's first term, and comes despite soaring war costs and $50 billion (euro39.4 billion) in emergency spending for hurricane relief.
House Budget Committee Chairman Jim Nussle credited the improving deficit numbers to "a responsible budget blueprint and pro-growth policies," even as Democrats pointed out that at $250 billion (euro197.4 billion), the deficit is still one of the largest in U.S. history.
"Though today's estimates for 2006 are not as pessimistic as some earlier estimates, it is clear that the budget remains on the wrong track," said top budget panel Democrat John Spratt Jr. "The Congressional Budget Office and even the Bush administration are estimating that deficits will be even larger next year."
But when measured against the size of the economy, which is the comparison economists think is most important, the deficit picture looks even better.
At 1.9 percent of gross domestic product, the 2006 deficit registers far below those seen in the 1980s and early 1990s. The modern record of 6 percent of GDP came in 1983 and deficits greater than 4 percent in 1991 and 1992 drove Congress to embark on a 1993 deficit-cutting drive.
Still, the long-term deficit picture remains bleak due to the looming retirement of the Baby Boom generation, which threatens to swamp medical and social benefit programs for the elderly.
The CBO estimates reflect actual government revenues and expenditures through August and estimates for September. The Treasury and the White House budget office are expected to release official deficit numbers next week.
Tax receipts are up $253 billion (euro199.7 billion), a whopping 12 percent over last year. That is the thirds consecutive year of strong revenue growth after a dismal performance in the early part of the decade. Revenues dropped three years in a row after fiscal 2000 but picked up again in 2004.
Taxes paid quarterly on corporate profits and by wealthier people and small businessmen were especially strong in 2006. Corporate income taxes rose 27 percent over 2005 while nonwithheld receipts increased 19 percent.
In contrast, income taxes and payroll taxes for medical and social programs and unemployment insurance grew by only 7 percent. Critics of GOP economic policies say that's a sign that lower- and middle-income people aren't getting as much of a lift from the current recovery.
"The benefits of the economic expansion have not been equally distributed," said Jim Horney, a budget analysts for the liberal-leaning Center on Budget and Policy Priorities.


Updated : 2020-12-01 13:34 GMT+08:00