Yahoo! News - Federal Deficit Surges to Record $413B

Yahoo! News - Federal Deficit Surges to Record $413B

White House - AP Cabinet & State
AP
Federal Deficit Surges to Record $413B

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By ALAN FRAM, Associated Press Writer

WASHINGTON - The federal deficit surged to a record $413 billion in 2004, the Treasury Department (news - web sites) announced Thursday, injecting the figure into a presidential campaign in which the two parties have clashed over President Bush (news - web sites)'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 (news - web sites) 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 (news - web sites) of Massachusetts.

"There is simply no credible way to present the largest deficit in history as good news," said Rep. John Spratt (news, bio, voting record) 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 (news - web sites) 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.