CBO Drops Surplus Projection by $4 Trillion

On their first day back in Washington, members of Congress from both sides of the aisle went right to work casting blame for the reduced surplus projection announced by the Congressional Budget Office.

Estimates by the nonpartisan CBO suggest surpluses in the coming decade will be $1.6 trillion rather than the $5.6 trillion esimated a year ago.  The $4 trillion represents a 71 percent drop for the years 2002-2011, assuming no changes in current tax or spending programs.

The projected surplus through 2012 is $2.26 trillion, rather than an earlier projection of $6.1 trillion.

The news prompted Democratic senators to blast President Bush for pushing the 10-year $1.35 trillion tax cut passed last year.

"The president told us and told the American people that we could have it all," said the budget panel chairman, Sen. Kent Conrad, D-N.D. "He was wrong by a country mile." 

Congressional Republicans defended the president's tax cut, saying the new figures represent losses due to the recession and efforts to strengthen the economy and battle terrorists. 

"The choice is to have a deficit and provide money for those priorities, or to try not to have a deficit and thus not accept those priorities," said Sen. Pete Domenici, R-N.M. 

White House spokesman Ari Fleischer took another approach, saying that the tax cut did exactly what it was supposed to do.

"The purpose of government is not to keep taxes high on the American people so the government can run gargantuan surpluses, which gets spent anyway. The purpose of the government is keep taxes as low as possible while funding the government's vital priorities," he said. 

"The government which had a gargantuan surplus will now have a very large surplus," he added.

This year, however, the budget will face a deficit.  CBO is projecting a $21 billion shortfall this year and $14 billion in 2003, a condition that the White House Budget chief Mitch Daniels already forecast late last year. 

Bush plans to send Congress a $2 trillion budget for 2003 on Feb. 4. Congressional and administration sources have said it will project deficits of about $100 billion this year and $80 billion in 2003 — assuming that Bush proposals for anti-recession tax cuts and extra spending for defense and homeland security are enacted. 

Last year, CBO predicted surpluses of $313 billion this year and $359 billion in 2003. It attributed this year's recession for the short-run drop in expectations. Other costs were attributable to the tax cut for $1.28 trillion, spending and other legislation for $583 billion, extra interest payments on the national debt for $562 billion, and changes in the way CBO projects federal tax collections and spending for $660 billion. 

The expectation of lower numbers has been a topic for Democrats seeking to build on their congressional numbers in the fall election. 

Democrats say the Bush tax cut is mostly to blame, along with the Republicans' reliance last year on unrealistically optimistic economic projections for coming years. In addition, they say portions of the surplus generated by Social Security and Medicare will now have to be spent to pay for other federal programs. Many politicians of both parties had promised to set aside Social Security and Medicare surpluses for debt reduction or to overhaul the two programs for the elderly and disabled.

Republicans counter Democratic arguments by saying that strengthening the economy means resisting Democrats who want to block parts of last year's tax cut from taking effect in future years. They also say that although they want to protect budget surpluses, defending the country takes a higher priority.

The government ran a record $237 billion surplus in 2000. It ran a $127 billion surplus in 2001. The biggest deficit was $290 billion in 1992.

The Associated Press contributed to this report.