WASHINGTON – The Bush administration and Congress' nonpartisan budget analyst are dramatically lowering their expectations for federal surpluses as the economy continues to look weaker.
The Congressional Budget Office estimates that next year's surplus will be between $36 billion and $56 billion, said an aide, speaking on condition of anonymity.
That is a dramatic drop from the $176 billion it projected just last month. It is also about what many congressional and private experts have expected, though some say the government might run a deficit for the first time since 1997.
Separately, White House budget director Mitchell Daniels told lawmakers Wednesday that he now estimates this year's surplus at as low as $120 billion. That's a steep drop from August, when the administration projected $158 billion in black ink.
It was unclear how much of the decline in the White House's estimated surplus for this year is due to the blow the Sept. 11 terrorist strikes delivered to the already limp economy. Fiscal 2001 ends on Sunday, so the impact of the attacks would be limited to the year's final 20 days.
Even so, the declining surplus expectations underline the speed with which the economy and the government's books are deteriorating.
Last spring, President Bush said this year's surplus would be $281 billion and CBO said it believed next year's surplus would be $304 billion. Both projections were made when the economy's weaknesses were less apparent, and before Bush pushed a $1.35 trillion, 10-year tax cut through Congress.
Though the new fiscal outlook marks a sharp reversal from earlier projections of years of big surpluses, it is being met with a grim acceptance by members of both parties.
"I think the overriding concern should be economic recovery," said Senate Budget Committee Chairman Kent Conrad, D-N.D.
"I don't think that's a prime consideration when you're fighting a war and when you may be in a recession," said Sen. Charles Grassley of Iowa, top Republican on the Senate Finance Committee, when asked if budget constraints were limiting the size of an economic stimulus package he and other lawmakers are discussing.
If both forecasts are accurate, the projected Social Security surpluses for each year would be substantially eroded. Though that was politically forbidden for most of this year as the two parties positioned themselves as fiscal watchdogs, the attacks and the weak economy have made those promises moot.
CBO officials have told lawmakers and congressional aides that more than half the reduction in next year's projected surplus was from lowered revenue projections caused by the weak economy. The rest was mostly from increased spending for defense, intelligence, aid to the airlines and perhaps other ailing industries and other measures aimed at responding to the attacks.
Daniels, who used his numbers in a closed-door meeting with leaders of the House and Senate budget committees and later to reporters, attributed the decline mostly to a drop in federal revenue.
He did not mention any new figures for next year.
Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee, issued a report Wednesday saying next year's deficit could be as large as $75 billion.