RECORD BREAKING DEFICIT

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Sources: CBO Sees $477 Billion Deficit in 2004
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By Andrew Clark

WASHINGTON (Reuters) - The Congressional Budget Office (news - web sites) on Monday forecast a slight improvement in this year's record federal budget deficit, but new evidence of worsening deficits over the next decade pose political problems for President Bush (news - web sites) in this election year.


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In its bi-annual budget outlook, details of which were obtained by Reuters from congressional sources, the nonpartisan agency forecast a federal deficit of $477 billion in 2004, only $3 billion less than the last forecast made in August.


It predicted next year's deficit will total $362 billion, up from $341 billion predicted in August. Based on current federal spending plans and tax policy, the deficit is expected to reach nearly $1.89 trillion between 2005 and 2014, up from prior predictions of $1.4 trillion in the next decade.


The government's previous record deficit of $374 billion, posted in fiscal year 2003, easily eclipsed the prior high of $290 billion set in 1992. The shortfall predicted for 2004 would still be less than levels seen in the early 1980s when considered as a percentage of the size of the U.S. economy.


While the U.S. budget outlook may not have changed too much over the past six months, the political situation has recently shifted significantly where fiscal matters are concerned.


POLITICAL UNEASE


Democrats have long slammed Bush and his big tax cuts for the steep slide in the government's finances since the record budget surplus of $236 billion in 2000. But their criticisms have not yet struck much of a chord outside Washington.


Now, however, just as the White House prepares to roll out its 2005 budget on Feb. 2, Bush has also begun taking fire from conservatives within his own party for not laying out concrete plans to cut government spending and reduce the deficit.


That led administration officials to promise on Thursday an effective freeze on federal discretionary spending next year not connected to defense or homeland security, calling that the foundation of a plan to halve the deficit in the next five years. Automatic payments such as Social Security (news - web sites) and Medicare would not be affected.


Congressional and private-sector budget analysts, however, note the move would save the government only around $8 billion dollars out of a $2 trillion-plus federal budget -- even if Congress can be made to swallow the cuts it would require.


"It's more like an effort to get through the next 10 days," said Stan Collender, a veteran budget watcher at public relations firm Fleishman Hillard. "It isn't going to happen."