- WASHINGTON (Reuters) - The
Congressional Budget Office on Tuesday slashed its forecasts of government
budget surpluses over the next decade by 80 percent, in a report that underscored
the recent slide in the U.S. fiscal position and provoked furious pre-election
finger-pointing on Capitol Hill.
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- In the report, a copy of which was obtained by Reuters,
Congress' nonpartisan budget watchdog projected cumulative surpluses of
just $336 billion from 2002 through 2011, down from the $1.7 trillion it
last forecast in March.
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- As recently as last year, the CBO was predicting 10-year
surpluses of over $5.6 trillion, a prospective windfall that has now largely
evaporated.
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- The "vanishing surplus" has become a hot political
issue ahead of November's high-stakes congressional elections, where small
voting swings could shift party control of both the House of Representatives
and the Senate.
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- The CBO also estimated the government would post a $145
billion deficit in fiscal year 2003 and confirmed its earlier forecast
of a $157 billion deficit in fiscal year 2002, which ends on Sept. 30.
The federal budget will not return to balance until 2006, it predicted.
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- Democrats blame current budget woes on President Bush's
$1.35 trillion tax cut package last year, though few have so far been willing
to call for it to be rolled back.
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- And they say new tax breaks the White House is reportedly
considering would add insult to fiscal injury.
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- BLAME GAME
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- "CBO's update renders a strong verdict: the budget,
under Republican stewardship, is deteriorating at a rapid rate," said
South Carolina Rep. John Spratt, the top Democrat on the House Budget Committee.
"The problem is getting worse, and the Bush administration has no
plan to correct it."
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- Republicans counter the tax cut is aiding the U.S. recovery
from recession, a stock market slide and the aftermath of Sept. 11, factors
they point to explain current budget setbacks.
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- They have sought to recast the deficit debate into one
on Congress' spending habits -- accusing Democrats of ignoring fiscal discipline
by pushing for more money for nonemergency government programs.
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- The CBO outlook -- which by law is based only on current,
and not prospective, fiscal policies -- is considerably gloomier than comparable
Bush administration forecasts.
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- The White House last month projected a 2003 deficit of
just $62 billion and a total surplus of $1.7 trillion through 2011.
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- The CBO also predicted a cumulative budget surplus of
just over $1.0 trillion for the 10 years from 2003 through 2012, down from
the $2.4 trillion it last projected in March.
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- But it also noted most of those surpluses accrue only
if last year's tax cuts are allowed to expire in 2010 as scheduled -- something
many analysts believe is unlikely.
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- In its economic outlook, the agency said it expected
the U.S. economy will continue its modest recovery this year and strengthen
next year. It forecast real GDP growth of 2.3 percent in fiscal year 2002
and 3.0 percent in fiscal 2003.
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