White House trims budget deficit forecast to $205b

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WASHINGTON, July 12 (AFP): The White House yesterday cut its forecast for the federal budget deficit this year to 205 billion dollars, saying an expanding economy will boost tax revenues.
The projection for the 2007 fiscal year to September 30 represented a reduction of 43 billion dollars or 18 per cent from last year, the White House said in a semi-annual budget review.
"This projected deficit is 1.5 per cent of gross domestic product (GDP), well below the 40-year average of 2.4 per cent," a White House statement said.
"America's economy keeps growing, government revenues keep going up, the budget deficit keeps going down-and we've done it all without raising your taxes," President George W Bush said after his budget office released the figures.
"It's good news, but there's more work to be done. A shrinking deficit is good; no deficit is better."
The White House repeated its goal of balancing the budget by 2012, and said this would be the case based on current spending programmes. But the Republican president's term ends in January 2009.
"The federal deficit is declining for the third year in a row, and the president's goal to balance the budget by 2012 is achievable under the president's proposals, which would lead to a budget surplus in 2012 of 33 billion dollars," the White House said.
Over the first eight months of the fiscal year, the US government has run a deficit of 148.5 billion dollars, compared with 227 billion in the 2006 fiscal year, according to US Treasury figures.
Critics of the administration said Bush has squandered the budget surplus he inherited in 2001 by implementing lavish tax cuts for the wealthy. Bush has said the tax cuts have stimulated the economy and that most of the new spending has been for his worldwide war on terror.
"Nothing in the administration's deficit announcement changes the failed fiscal record of President Bush," said Senate Budget Committee chairman Kent Conrad, a Democrat.
"He has increased spending by nearly 50 per cent since taking office, while at the same time repeatedly cutting taxes primarily on the wealthiest," he said.
"The result has been that the 5.6-trillion-dollar projected surplus he inherited has been wiped out. And debt has exploded on his watch-rising from 5.8 trillion dollars in 2001 to approximately nine trillion by the end of this year."
But Republican Senator Judd Gregg said the latest budget report "is further proof that the current tax system is working."
He added: "Unfortunately, this economic boon for American families and small businesses may soon come to an end, following the passage of a Democratic budget that contains the largest tax hike in the nation's history."
James Horney of the Centre on Budget and Policy Priorities, a budget watchdog group, said however "there is overwhelming evidence that the administration's claim that the tax cuts are producing unusually strong economic growth is not accurate."
He added: "Without the president's tax cuts, which will cost 300 billion dollars in 2007 alone, the federal government would be running a nearly 100-billion-dollar surplus this year instead of the 205-billion-dollar deficit that the administration estimates."