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US 10-Year Budget Surplus
Forecast Slashed By 80%

8-27-2


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.
 
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.
 
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.
 
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.
 
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.
 
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.
 
And they say new tax breaks the White House is reportedly considering would add insult to fiscal injury.
 
BLAME GAME
 
"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."
 
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.
 
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.
 
The CBO outlook -- which by law is based only on current, and not prospective, fiscal policies -- is considerably gloomier than comparable Bush administration forecasts.
 
The White House last month projected a 2003 deficit of just $62 billion and a total surplus of $1.7 trillion through 2011.
 
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.
 
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.
 
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.
 
Copyright © 2002 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.





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