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Federal Deficit Surges To Record $413 Billion
WASHINGTON (Oct. 04) – The Federal deficit surged to a record $413 billion in 2004, the Treasury Department announced Thursday, injecting the figure into a presidential campaign in which the two parties have clashed over President Bush's management of the economy and the budget.
The number was a significant improvement from the shortfalls that analysts projected earlier this year, including a $521 billion estimate the Bush administration made in February. In March, the nonpartisan Congressional Budget Office estimated a deficit of $477 billion.
Both the administration and the Congressional Budget Office had lowered their deficit forecasts as the year progressed, due to stronger than expected revenue collections and lower spending.
Even so, the final deficit figure easily surpassed the previous record in dollar terms – a revised $377 billion deficit run up last year. With inflation filtered out, the $413 billion shortfall was the worst since World War II.
The government's 2004 budget year ran through Sept. 30.
In a statement, Treasury Secretary John Snow cited improving economic data and said the budgetary improvement shows Bush is on track to halve the over five years as he has promised.
"All of this shows that the president's tax relief initiatives are having the intended effects," Snow said.
White House budget chief Joshua Bolten said while the shortfall was "unwelcome," it would be reduced "if we stick with the president's plan of economic growth and spending discipline."
Democrats disagreed. They argued that the $5.6 trillion 10-year surplus Bush himself forecast in 2001 has turned into deficits totaling a projected $2.3 trillion, a near-$8 trillion turnabout.
"This is the most fiscally irresponsible administration in history, turning record surpluses into record deficits in four years, with a plan to do more of the same in a second term," said Jason Furman, economic policy director for Democratic presidential candidate Sen. John Kerry of Massachusetts.
"There is simply no credible way to present the largest deficit in history as good news," said Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee. "The Republicans control the House, the Senate and the White House, but today's news proves again they have failed to control the budget."
The government spent $2.292 trillion last year and collected $1.88 trillion in revenue, the Treasury Department said.
The administration and congressional Republicans have discounted the significance of a deficit of this magnitude.
They say the more important measure is that the 2004 shortfall was an estimated 3.6 percent the size of the economy, well below the worst-ever 6 percent figure set in 1983 under President Reagan.
Many economists agree that such a comparison is more significant because it shows how affordable the deficit is for the nation. But many of them are uncomfortable with shortfalls of that size because the deficits are expected to worsen later this decade when the huge baby boom generation begins drawing on Social Security and Medicare.
The Treasury released the final deficit figure the same day it announced that the government has begun using accounting procedures to avoid hitting the $7.4 trillion statutory national debt limit.
Snow made that announcement in a letter to Congress. Lawmakers have yet to pass legislation needed to boost the government's borrowing authority over the $7.4 trillion limit.
"Given current projections, it is imperative that the Congress take action to increase the debt limit by mid-November" when "all of our previously used prudent and legal actions to avoid breaching the statutory debt limit will be exhausted," Snow wrote House and Senate leaders of both parties.
When the government runs an annual deficit, it must borrow money to finance its operations, driving its accumulated debt ever higher.
Snow's actions were taken with the total national debt at $7.379 trillion on Wednesday, the latest day available, just $4.1 billion below the current limit set by Congress of $7.384 trillion.
Treasury Skirts $7.4 Trillion Debt Limit
WASHINGTON (Oct. 14) – Treasury Secretary John Snow announced Thursday that the government has begun using various accounting procedures to avoid hitting the $7.4 trillion national debt limit.
Snow made the announcement in a letter to Congress, which has not passed legislation needed to boost the government's borrowing authority, which now stands at a statutory limit of $7.4 trillion.
''Given current projections, it is imperative that the Congress take action to increase the debt limit by mid-November,'' when ''all of our previously used prudent and legal actions to avoid breaching the statutory debt limit will be exhausted,'' Snow wrote in the letter to House and Senate leaders of both parties.
Democrats used Snow's announcement to attack the Bush administration's record budget deficits, which will force Congress to increase the debt ceiling for the third time in three years.
''Though the administration tries to diminish the gravity of the problem, there is no way to dismiss debt ceiling increases at historic highs. This is the burden Republican policies are passing onto next generations, and there is no plan or prospect for confronting it,'' said Rep. John Spratt of South Carolina, the top Democrat on the House Budget Committee.
Congress is expected to come back in a special session after the Nov. 2 elections to deal with the debt limit and pass a massive spending bill to keep the government running.
Republican leaders did not want to take up the debt issue before the election and open themselves up to Democratic attacks about the record federal budget deficits run up during President Bush's first term in office.
The government recorded a $374 billion budget deficit last year – a record in dollar terms – and projections call for this year's to be even larger, more than $400 billion, which would set a new record.
Snow said in his letter he would begin halting new investments in a retirement fund for federal workers as a way to stay under the debt limit. Snow said the maneuvers would have no lasting impact on the fund because the government would make up the lost investments and any lost interest payments once the government's borrowing authority has been boosted.
Snow also noted that the same maneuver had been used by his predecessors.
Sen. John Kerry, the Democratic presidential challenger, has attacked Bush for taking the government from surpluses to record deficits, a switch that Kerry blames on large tax cuts Kerry contends favor the wealthy.
Bush, however, counters that the tax cuts helped to lift the economy out of the 2001 recession and that the budget deficits were caused by the need to beef up spending to fight two wars and protect the homeland against terrorist threats.
A Treasury Department spokeswoman said the battle over the debt limit was not expected to affect the Treasury's announcement of when it will hold its next quarterly auctions of government securities.
* Post was edited: 2004-10-15 10:11:00
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