White House Admits Record Deficit
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By Adam Entous
WASHINGTON (Reuters) -
The White House expects the federal budget deficit to balloon to a record high of more than $450 billion this fiscal year, but pledged for the first time to cut it in half "over the next few years." 
Democrats accused President Bush (news - web sites) of using rosy economic assumptions to understate the magnitude of a budget gap approaching the half-trillion-dollar mark for the first time.
The White House countered that the budget deficit -- which grew by $150 billion from the administration's own forecast five months ago -- was "manageable" and reflected economic and national security priorities following the Sept. 11, 2001, attacks.
The new projections include initial costs from the war in Iraq (news - web sites) as well as Bush's sweeping tax cuts.
"The deficit certainly remains a concern, but it is one that is manageable and it is one that we are addressing," White House spokesman Scott McClellan said.
He said the administration would press Congress to hold the line on spending and expected the economy to grow "stronger in the coming year," and issued a new pledge: "Over the next few years, we will cut this deficit in half."
Military operations in Iraq and Afghanistan (news - web sites) have cost roughly $4.8 billion a month -- $58 billion on an annual basis -- which is well over initial estimates.
These war costs, plus the weaker than expected economy and the tax cuts, forced the White House to revise its budget forecasts from February, when it expected a deficit of $304 billion for the current fiscal year and $307 billion next year.
Underscoring the sharp reversal in the U.S. fiscal position, White House and congressional analysts had as recently as 2001 predicted 10-year budget surpluses of up to $5.6 trillion. Many analysts now expect massive deficits through 2013.
Rising deficits have yet to become a major political issue outside Washington, but some analysts believe that will change if they keep climbing ahead of the 2004 presidential election.
"We are drifting into bigger and bigger deficits and what I find alarming is that neither party is willing to give up its political priorities to do anything about it," said Robert Bixby, executive director of the Concord Coalition, a balanced budget advocacy group.
BEST FACE
But the White House sought to put the best possible face on the bleak budget news.
At more than $450 billion, the new deficit would eclipse the previous record of $290 billion in 1992 when Bush's father was president.
The U.S. government enjoyed four straight years of budget surpluses between 1998 and 2001.
"I think people understand that we had a recession, we had lower revenues and a war on terrorism that led to the deficit coming back," McClellan said, but he added: "It is not something that is harming the economy right now."
Democrats countered that the budget deficit was approaching crisis levels not seen since the Reagan administration, and blamed Bush's tax cuts.
"President Bush is repeating two dangerous habits: misleading the American people and ducking responsibility for his mistakes," said Democratic presidential hopeful Joseph Lieberman, a senator from Connecticut.
"As bad as the budget is going to appear, it's actually worse," said the top Democrat on the House of Representatives Budget Committee, Rep. John Spratt (news, bio, voting record) of South Carolina.
Democrats and some analysts say that when revenue from Social Security (news - web sites) is set aside, the actual deficit could approach $600 billion, or 5.5 percent of gross domestic product, one of the highest since World War II.
$45o BILLION
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