Bush’s Tax Relief To Shrink Federal Deficit

by Mike Godfrey, Tax-News.com, Washington

15 July 2005

The White House has confirmed that the federal deficit is expected to fall sharply this year and will continue falling faster than predicted over the next four years as the strengthening economy bolsters tax receipts.

According to the Bush administration's mid-year update on the budget, this year's deficit will be $94 billion lower than first anticipated and will fall to $333 billion - $79 billion less than in 2004.

"We got to this point largely because of the President's pro-growth policies, especially tax relief," White House budget director, Joshua B. Bolten told reporters on Wednesday.

"Those policies have strengthened the economy, which is now producing better than expected tax revenues. Of the $94 billion decline in the deficit from last February, $87 billion comes from stronger receipts, $7 billion comes from lower than expected outlays," Mr Bolten explained.

At its currently forecast level, the US budget deficit for 2005 would be smaller than the deficits in 15 of the last 25 years, according to the White House.

The administration expects the deficit to have shrunk to $162 billion by 2009. At 1.1% of gross domestic product, Bolten stated that this would be less than half the size of the average deficit over the last 40 years.

"That would significantly surpass the President's goal of cutting the deficit in half from its projected 2004 peak of $521 billion, or 4.5 percent of GDP," Mr Bolten observed.

While the deficit forecast has factored in $50 billion in spending for the ongoing military operations in Iraq and Afghanistan, Bolten conceded that the actual funding figure is uncertain, and may be considerably more.

"This review also does not reflect the effect of undetermined, but anticipated supplemental requests for ongoing operations beyond 2006," he noted.

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