US Senator Conrad: Near-Term Budget Outlook Improved January 23, 2007Posted by notapundit in Congress, Politics, US News.
WASHINGTON (Dow Jones)–New federal budget deficit projections are likely to show a “substantial” improvement over estimates released just five months ago, Senate Budget Committee Chairman Kent Conrad, D-N.D., said Tuesday.
The Congressional Budget Office is expected to release those estimates Wednesday morning.
“I think there will be a significant improvement,” Conrad said.
In August, the CBO predicted that the federal budget deficit for fiscal year 2007 would be roughly $286 billion. That would have been a $38 billion increase from the $248 billion budget deficit recorded for fiscal year 2006, which ended Sept. 30.
Jim Horney, a budget expert at the Center on Budget and Policy Priorities, agreed with Conrad, saying there likely will be a “noticeable improvement” in the budget outlook for the next decade.
But Horney said he also expects the CBO to say that nothing in the near-term outlook will alter the long-term fiscal crisis the country faces because of rising health-care costs and the retirement of the baby-boomer generation.
“Nothing that shows up in this has a substantial effect over the long term,” Horney said.
The U.S. budget has already shown signs of improving for the fiscal year.
For the first quarter of fiscal 2007, receipts have outpaced by $43 billion those from the same period in 2006. On the other hand, spending for the period has risen just $8 billion from year to year.
As a result, instead of the $119 billion deficit recorded for the first quarter of 2006, the government ran an $85 billion deficit for the first quarter of 2007.
The CBO was already predicting a sharp decline in deficits after the end of the decade.
In August, the CBO predicted that annual budget deficits would rise to $328 billion by 2010, but would fall to $54 billion by 2012.
Conrad said he expects a substantial improvement in those mid-term projections, but he warned not to make too much of those estimates.
By congressional accounting conventions, those estimates don’t include the cost of extending the tax cuts enacted in President George W. Bush’s first term. They also do not include the cost of extending a now-almost annual fix to the alternative minimum tax.
Conrad said that if you include those costs it will be “very hard” to write a budget plan that balances the federal budget by 2012.
He and House Budget Committee Chairman John Spratt, D-S.C., have said they both plan to write a budget this spring that reaches balance by 2012.
But in contrast to the Bush administration, which has routinely ignored the costs of the war in Iraq and of extending the AMT, they plan to include the cost of those items in their budget.
Bush argues that the war is an unbudgetable emergency that cannot be funded through the normal budget process. He also says fixing the AMT should be part of a revenue neutral tax reform plan, so there is no need to include the cost in his budget.
“The war is really the thing that makes it tough to get to 2012,” Conrad said.
The U.S. has spent roughly $380 billion on the war in Iraq so far and Bush is expected to ask for at least another $100 billion to last through October.
House Majority Leader Steny Hoyer, D-Md., said that in the past, Democrats have mirrored Bush’s budget assumptions in their own budget proposals so as to provide an “apples to apples” comparison for where the plans differ.
Now that Democrats are in charge, Hoyer said Democrats will try to do a better job of using more realistic budget assumptions.
“We are going to try to do a budget that is as accurate as we can be and still have the American public understand the relationship between the President’s budget and ours,” Hoyer said.
Bush has said he plans to propose a balanced budget plan next month, but hasn’t said much about how he intends to get there.
And in an opinion piece written for USA Today, OMB Director Rob Portman said the budget will show “declining deficits every year and a surplus in 2012.”
Portman said “the president’s budget will demonstrate how balance can be achieved by using cautious economic and revenue projections in line with forecasts by outside experts.”
Congressional Democrats are worried that in addition to the usual tactics of ignoring the AMT and outyear war costs, the White House might try to make that task a little easier through rosy economic assumptions.
Rumors have been floating around Capitol Hill that the White House will predict federal revenue will grow by more than 6% for fiscal 2006.
Horney said the White House’s near-term assumptions might be conservative, but he predicted those assumptions will be “on the optimistic side” in later years.
“Probably nothing that would be outrageous, but something making it easier to balance the budget by 2012,” Horney said.
By John Godfrey, Dow Jones Newswires