U.S. budget deficit

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The U.S. budget deficit was a key issue for the American public in the U.S. presidential election, 2004.

Contents

War in Iraq + Hurricane Katrina

"Foreigners have in effect been financing 43 percent of the cost of the Iraq war, a war many of them oppose," David R. Francis wrote in the September 19, 2005, Christian Science Monitor. "Now," he says, "they will help to finance the federal government's cost of Katrina, a disaster their press tells them was badly managed initially."

There is cause for additional concern, Francis said, since "In fiscal 2006, starting next month, Katrina may add as much as $200 billion to the federal deficit. The total deficit could reach $500 billion, Washington experts reckon. Katrina could cost a trillion or so in the years ahead.

"So far, foreign banks, pension funds, insurance companies, and other private investors seem content to invest in the US by buying up almost half of Uncle Sam's new Treasury bonds and notes at weekly auctions," Francis said. "But, despite relatively low unemployment, low interest rates, and substantial economic growth in the US, some economists worry that Katrina could be the straw that breaks the camel's back - the one that seriously damages the economy."

Unprecedented Budget Gap 2003

According to an October 20, 2003, Agence France Presse news article, the United States posted a record 374-billion-dollar budget deficit in 2003],

"US President George W. Bush's administration posted an unprecedented 374-billion-dollar budget gap in 2003 and warned of a further explosion in the deficit next year.
"The record budget shortfall for the 2003 fiscal year ending September 30 had more than doubled from a deficit of 158 billion dollars in 2002 as military spending surged, partly to pay for the Iraq war operations, and as income from taxes declined.
"The White House predicted a deficit of more than half a trillion dollars next year. ... The Bush administration stressed, however, that the 2003 deficit was much smaller than the 455-billion-dollar budget gap it had predicted just three months ago.
"'The improvement in our budget picture since our forecast last July is an encouraging sign that the economic recovery is gaining momentum,' Office of Management and Budget director Joshua B. Bolton said. ... 'Although the deficit is still projected to increase in 2004 and will likely exceed 500 billion dollars even with the strengthening economy, we can put the deficit on a responsible downward path if we continue pro-growth economic policies and exercise responsible spending restraint,' he said.
"US government receipts had dropped to 1.782 trillion dollars in 2003 from 1.853 trillion dollars in 2002, the government said.
"Individual income tax receipts plunged 64 billion dollars to 794 billion dollars. Corporate tax income tumbled 16 billion dollars to 132 billion dollars.
"Critics have blamed Bush's 350-billion-dollar tax cut package for fattening the deficit. But the administration says the cuts are needed to stimulate demand and fire up economic growth.
"Government expenditure, meanwhile, surged to 2.157 trillion dollars from 2.011 trillion dollars.
  • "Military spending leapt 57 billion dollars to 389 billion dollars in the year. Much of the military expenditure had been slower than anticipated, however, spilling more red ink into next year.
  • "Homeland Security spending doubled to 32 billion dollars.
  • "Expenditure on U.S. Social Security rose 19 billion dollars to 508 billion dollars, and spending on labor expanded five billion dollars to 69 billion dollars.
  • "International aid spending rose about one billion dollars to 13 billion dollars.
"Treasury Secretary John Snow celebrated the fact that the deficit was smaller than the White House had expected in July. ... 'Today's budget numbers reinforce the indications we have seen for some months now: that the economy is well on the path to recovery,' Snow said in the budget report. ... 'Increased consumer income and spending, a robust housing market, improved business spending -- coupled with low inflation and low interest rates -- all show we are heading in the right direction of an accelerating recovery,' Snow said. ... 'As the economy grows, government revenues will go up, which will help keep the deficit under control.'
"Although the 2003 deficit was less than had been forecast by the White House, it was exactly in line with the 374-billion-dollar shortfall predicted by the bipartisan Congressional Budget Office on October 9. ... The 2003 deficit was equal to 3.5 percent of annual US gross domestic product (GDP). ... Other budget figures showed spending on education climbed 11 billion dollars to 57 billion dollars, and agriculture expenditure grew three billion dollars to 72 billion dollars. ... But transportation spending dropped five billion dollars to 51 billion dollars. And Treasury Department expenditure fell four billion dollars to 367 billion dollars."

Related SourceWatch Resources

External links

Undated

2003

2004

  • Mortimer B. Zuckerman "Guns, butter, and hubris", U.S. News.com February 2, 2004 edition: The Wall Street Journal describes the Bush administration "as 'the most profligate administration since the 1960s.' Reaching back to his Navy days for a more colorful metaphor, Sen. John McCain says, 'I've never known a sailor, drunk or sober, with the imagination this Congress has.'"
  • The Pinocchio Budget, New York Times Op-Ed, February 3, 2004: "The president's new budget proposal is an exercise in election-year cynicism. It calls for cuts in programs President Bush knows Congress will protect and future tax cuts he knows the nation cannot afford. Meanwhile, vital domestic programs, like environmental protection and housing for the poor, wind up as the sacrificial victims."
  • Paul Krugman, Another Bogus Budget, New York Times Op-Ed, February 3, 2004: "Even as the Republican leadership strong-armed the Medicare drug bill through Congress, the administration was sitting on estimates showing that the plan would cost at least $134 billion more than it let on. But let's not make too much of the incident. After all, it's not as if our leaders make a habit of faking their budget projections. Oh, wait. ... The budget released yesterday, which projects a $521 billion deficit for fiscal 2004, is no more credible than its predecessors. When the administration promises much lower deficits in future years, remember this: two years ago it projected a fiscal 2004 deficit of only $14 billion. What's new this time is that the administration has decided to pay lip service to conservative complaints about runaway spending."
  • Defending Spending? Bush's Blooper: The President wrongly claimed he cut the growth of discretionary spending. Reality: the growth rate multiplied, FactCheck, February 9, 2004: "President Bush slipped up in his hour-long interview with NBC's Tim Russert over the weekend, claiming that the growth of discretionary federal spending has slowed markedly since he took office. But in fact, annual growth has been in double digits for the past three years, far higher than in any year of the Clinton administration. ... A Bush spokesman said the President meant to refer to discretionary spending minus military spending and spending for homeland security. But what the President actually said was wrong."
  • Linda Bilmes, The Truth About the Reagan Deficits, Washington Post, February 10, 2004: "Unfortunately, history is not about to repeat itself. The ability to recover from the 1980s deficits was the result of three historical 'flukes' that happened at the same time: a huge demographic bulge (the Baby Boom generation), an extremely strong dollar and a sudden peace dividend."
  • Paul Krugman, The Real Man, New York Times, February 13, 2004: "By my count, this year's budget contains 27 glossy photos of Mr. Bush. We see the president in front of a giant American flag, in front of the Washington Monument, comforting an elderly woman in a wheelchair, helping a small child with his reading assignment, building a trail through the wilderness and, of course, eating turkey with the troops in Iraq. Somehow the art director neglected to include a photo of the president swimming across the Yangtze River. ... In fact, those 27 photos grace one of the four most dishonest budgets in the nation's history -- the other three are the budgets released in 2001, 2002 and 2003. Just to give you a taste: remember how last year's budget contained no money for postwar Iraq -- and how administration officials waited until after the tax cut had been passed to mention the small matter of $87 billion in extra costs? Well, they've done it again: earlier this week the Army's chief of staff testified that the Iraq funds in the budget would cover expenses only through September."

2005

2006

2007

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