WASHINGTON – This year's federal deficit should exceed $300 billion, mainly due to growing defense spending and a limp economy that has depressed government revenue, the Congressional Budget Office (search) said.
The new estimate by Congress' nonpartisan fiscal analyst comes as Republicans try to enact a fresh round of tax cuts they say will stimulate economic activity and generate increased federal revenue. Democrats say the tax reductions will be a boon to the wealthy and make the worsening budget picture even bleaker.
According to the budget analysis, the federal deficit has reached an estimated $202 billion for the first seven months of the government's budget year, which began last Oct. 1. For the same six months last year, the deficit was $65 billion.
"CBO now expects that the government will end 2003 with a deficit of over $300 billion," said the report, which was dated last Friday.
The budget office's figures do not reflect the tax bills Congress is debating. The House version, which would cost $550 billion through 2013, is expected to add $60 billion to this year's shortfall. The Senate's smaller $350 billion measure would deepen this year's deficit by an estimated $44 billion.
Some private analysts have an even bleaker view of the budget, with some envisioning red ink this year totaling $425 billion.
President Bush's budget forecast a $304 billion deficit this year, assuming that all his tax and spending plans were enacted. That number seems virtually certain to be surpassed.
Underlining the government's revenue problems, the budget office's analysis estimated that the April surplus was only about $50 billion, the smallest for the month since 1995. April is the government's strongest month for revenue collecting because of the April 15 filing deadline for individual income taxes.
Overall, revenue collections through April were an estimated $1.055 trillion, or $62 billion lower than a year earlier.
The government has spent $1.257 trillion through April, or $76 billion more than in 2002, with defense, Social Security (search) and Medicare expenditures leading the way. The budget office said it expects defense spending to grow by 20 percent over last year's levels.
The highest deficit ever was $290 billion in 1992. But because the U.S. economy is much larger today than it was then, Republicans argue that today's projected shortfall will have less of an impact.
The budget office projection precedes a week in which Republicans will try pushing legislation through the Senate raising the government's borrowing limit by an enormous $984 billion to $7.38 trillion. The House has already approved such an increase.
Democrats plan to use that debate to argue that Bush's tax cuts -- including a major one in 2001 -- have caused the government's red ink problems. Republicans blame the weak economy and the costs of war and battling terrorism.