Bush, Democrats' balanced budget goals disintegrate

By Richard Cowan

WASHINGTON (Reuters) - President George W. Bush's days in the White House are winding down with a major promise of his second term going unfulfilled: putting the federal government on a track to balancing its budget.

Unfulfilled might be an understatement.

Washington's $3 trillion annual budget is way off the glide path to balance Bush once envisaged. Some economists think the deficit could hit $1 trillion this year, more than double the record $455 billion shortfall recorded last year.

With the economy in recession, two expensive wars dragging on and the prospect of hundreds of billions of dollars being spent to bail out ailing industries and stimulate the economy, nobody thinks it is possible to fix the budget by 2012. That was the date Bush set for achieving a balance between government spending and the revenues it collects.

Even the Democrats, who control Congress and who said they too would erase deficits by around 2012, no longer are making any predictions.

A PROBLEM WITH NUMBERS

"Next month I will submit a five-year budget proposal that will balance the federal budget by 2012," Bush said in January, 2007.

His proclamation is looking to be about as accurate as former Defense Secretary Donald Rumsfeld's comment in 2002 that the U.S.-led war in Iraq would not last longer than five months. It is now approaching six years in duration.

Bush can claim some success in shrinking deficits he created, from more than $400 billion in 2004 down to around $160 billion in 2007, before the recession kicked in.

That trajectory heartened economists who worry that large government budget deficits can raise borrowing costs for consumers or put the country's economic well-being in the hands of foreign governments, including China, which increasingly are financing Washington's debt.

Even with the falling deficits Bush touted a year ago, the cumulative debt held by the federal government has grown shockingly, from $3.4 trillion when he took office in 2001 to $10.6 trillion now.

That debt is guaranteed to get worse as President-elect Barack Obama and the Democratic Congress are preparing to enact a new economic stimulus bill that could cost $600 billion.

"Our nation is facing the biggest economic crisis since the Great Depression. Congress's primary job right now is to adopt legislation that will help us get us out of this ditch," said Thomas Kahn, staff director of the House of Representatives Budget Committee.

His panel soon will craft a new five-year budget blueprint. "It will be very important for the government to get onto a path of fiscal responsibility once the current economic crisis is over," Kahn added.

IF NOT 2012, WHEN?