Gov't. Red Ink Expected to Get Deeper

[January 23, 2008]  WASHINGTON (AP) -- The latest deficit projections from the Congressional Budget Office forecast a sea of red ink that will only deepen under plans to jump-start the economy with tax cuts and government spending.

The CBO, which was scheduled to release its deficit figures on Wednesday, crunches economic and budget data for lawmakers. Its latest numbers will probably reflect a boost of at least $250 billion this year due in part to slowing growth in tax revenues, especially by hard-hit corporations, said a congressional aide familiar with the upcoming report.

The nonpartisan CBO says the budget deficit will greatly exceed the $163 billion in red ink registered last year. Including likely but still unapproved outlays for the wars in Iraq and Afghanistan, the deficit for 2008 would total about $250 billion.

Officially, CBO predicts the 2008 deficit at $219 billion, but that figure fails to account for at least an additional $30 billion in war costs and the likely infusion of deficit-financed economic stimulus measures such as income tax rebates, business tax breaks and help for the unemployed now under discussion on Capitol Hill and at the White House.

Additional data such as CBO's economic forecasts, which are likely outdated given the recent spate of bad economic news, was to be released Wednesday. CBO Director Peter Orszag was scheduled to testify before the House Budget Committee.

The deficit seems to be an afterthought as lawmakers race toward agreement with President Bush on a plan to pump perhaps $150 billion worth of deficit spending into the economy. The bulk of the plan would come as tax cuts, though Democrats are pressing for additional help for the unemployed and people on food stamps. Constituency groups in both political parties are pressing for even more, such as Democratic-sought aid to cash-strapped states and people with high heating bills.

Most of any economic stimulus bill would be released before the Oct. 1 start of the 2009 budget year, with any benefits to the economy -- and therefore federal revenues -- lagging behind.

The White House is set to release its 2009 budget on Feb. 4, and Bush has promised a plan that would erase the deficit by 2012 if his policies are followed.

The 2006 deficit was $248 billion and had closed from a high of $413 billion registered in 2004.

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On the Net:

Congressional Budget Office: http://www.cbo.gov/

[Associated Press; By ANDREW TAYLOR]

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