WASHINGTON (Reuters) - President George W. Bush’s fiscal 2008 budget proposal would bring federal books roughly into balance by 2012, falling short of the administration’s boast that it would create a $61 billion surplus in five years, the Congressional Budget Office said on Friday.
In a preliminary analysis of the Bush budget blueprint that was submitted to Congress on February 5, the nonpartisan CBO forecast a $9 billion budget deficit in fiscal 2012 if the administration’s budget policies were enacted.
But that figure does not take into account an anticipated long-term fix of the alternative minimum tax so that the middle class is not ensnared by the tax designed for the wealthy.
It also assumes no further war costs in Iraq and Afghanistan beyond 2009.
“Under the president’s proposals, the deficit would decline steadily from 2008 through 2012, at which point it would be close to balance and remain that way through 2017,” CBO said.
In January, CBO estimated this year’s budget deficit will be $172 billion.
White House budget director Rob Portman said CBO’s analysis was basically in line with the administration’s, except for some different economic assumptions. “CBO shows that, under the president’s budget proposal, deficits will decline substantially over the next five years and approach virtual balance in 2012,” Portman said.
Rep. Paul Ryan of Wisconsin, the senior Republican on the House Budget Committee, hailed CBO’s analysis, saying it “shows you can get to a balanced budget without raising taxes.”
But Robert Greenstein, executive director of the Center on Budget and Policy Priorities, said the CBO analysis “confirms that the president’s budget is fiscally irresponsible.” He highlighted the $1.4 trillion in higher deficits between 2008-2017 than under current policy, mainly because Bush would extend tax cuts set to expire in 2011.
Congress is in the early stages of writing its own fiscal 2008 plan, which would also try to put the budget on a path to balance by 2012.
The Democratic-controlled Congress is expected to grant Bush his request for large increases in defense spending. But it is not expected to go along with his proposed cuts to some domestic programs.
Still unclear is what Congress will do about some of the expiring Bush tax cuts. Maintaining all those cuts would make it harder for Democrats to fund their domestic priorities while also balancing the budget in five years.
The prospect of balanced budgets in the next decade have not soothed many policymakers, who stress that an aging population will create serious long-term fiscal problems as government outlays for retirement and health benefits soar.
Federal Reserve Chairman Ben Bernanke last month told the Senate Banking Committee that those demands will create “an unsustainable fiscal situation.”
Attempting to head off just such a crisis, Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said he and his Republican counterpart on the panel, Sen. Judd Gregg of New Hampshire, will try this year to find a long-term solution to these rising expenses.
Conrad told reporters he wants to set up a 16-member group, including two Bush administration officials, to look at how to reform Medicare and Social Security. The panel also would look at the existing long-term imbalance between revenues and government expenditures. They hope to deliver recommendations to Congress by fall.
Additional reporting by David Lawder