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Budget decifit { April 26 2002 } Original Source Link: (May no longer be active)
http://www.washingtonpost.com/wp-dyn/articles/A51074-2002Apr25.htmlhttp://www.washingtonpost.com/wp-dyn/articles/A51074-2002Apr25.html
Budget Deficit for '02 May Top $100 Billion
Projections Raised as Revenue Falls
By Glenn Kessler
Washington Post Staff Writer
Friday, April 26, 2002; Page A01
Federal tax revenue is coming in significantly lower than expected, despite the improving economy, leading budget experts to nearly double the projected budget deficit for the current fiscal year.
The estimates, while preliminary, suggest that it will be much more difficult for the nation to return to budget surpluses in the next few years, and will place new pressure on Congress and the administration to trim federal spending or raise taxes.
The Congressional Budget Office earlier had predicted a deficit of $46 billion for the 2002 fiscal year, after taking into account the slowing economy, the president's tax cut and recently passed legislation to boost the economy. But individual tax receipts are running $40 billion below projections, and when all the receipts are collected, the projected deficit could be $30 billion to $70 billion higher, experts said.
Congress also is considering the president's request for a $27 billion supplemental spending bill, though only $10 billion to $15 billion would be spent in this fiscal year, probably bringing the overall deficit above $100 billion. That compares with a surplus of $127 billion in the previous fiscal year.
The Bush administration has suggested the government might begin running a surplus again as soon as 2004. But G. William Hoagland, Republican staff director of the Senate Budget Committee, said the new numbers raise "some concern about the president's commitment to get back to balance in 2004."
Administration officials said they are closely watching the daily reports on Treasury receipts, but they were not prepared to concede a shortfall until all of the taxes paid on April 15 were recorded. Hoagland and other experts, however, said 96 percent of individual tax receipts historically have been collected by April 23, leaving little doubt the projected deficit would be higher.
"This ought to be a sobering wake-up call," said Rep. John M. Spratt Jr. (S.C.), the senior Democrat on the House Budget Committee. "This will be a deeper and more intractable deficit than we thought."
Many budget analysts had hoped the relatively quick rebound in the economy would pull the nation out of deficit financing more quickly. But tax revenue has fallen, especially in the category that includes taxes on stock sales and stock options, a major source of the budget surpluses in the late 1990s.
Some economists had cautioned that the boom in revenue from capital gains and stock options was bound to decline after the stock market retreated from the dot-com-fueled heights reached in 2000. Administration and congressional budget forecasters earlier this year had trimmed their expectations for capital gains revenue, leading to lower projected 10-year budget surpluses. But the new numbers suggest that until the market takes off again, this will not be a growing revenue source. Goldman Sachs Group Inc., the Wall Street investment firm, last week reported that April tax receipts were running 30 percent below last year's level, the biggest drop since 1980.
The decline in tax revenue has long-term implications as well. Both the CBO and the Office of Management and Budget probably will have to account for the lower revenue base in the updated budget projections over the summer, which could result in grimmer 10-year budget forecasts. It would also place new scrutiny on the president's tax cut, which was crafted to phase in over 10 years on the premise that the government could expect more than $5 trillion in budget surpluses.
Spratt said "this is bad news for the budget and for people pushing more tax cuts."
Trent Duffy, an OMB spokesman, said officials thought it was still possible to receive a late infusion of cash as the last returns are catalogued. But he said that even if trends held, officials believed this was a "one-year phenomenon" that would be reversed as soon as the economy moved back into high gear.
He said the administration was sticking with its budget plan. Even so, he added, "this is why you've got to hold down on spending. . . . If the Democrats want to raise taxes, they are welcome to propose that. If they want to cut spending, we welcome their ideas."
© 2002 The Washington Post Company
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