Today the Congressional Budget Office projected a $337 billion deficit for 2006. The increase over last year's $318 billion recorded deficit is largely attributed to hurricane costs and the introduction of the Medicare prescription drug benefit this month. $337 billion is far less than the Office of Management and Budget's estimate stating that the deficit will exceed $400 billion this year.

A problem with these projections is that by law, the CBO cannot factor in the costs of policies which have not yet been enacted. Therefore, new spending on the Iraq war, tax-cut extensions, and new Gulf Coast reconstruction spending -- all huge costs -- are not included in this figure. The agency noted that a more realistic deficit projection, taking into account some of these costs, would be more like $360 billion. Without the costs however, the report is able to show declining deficits beginning with $270 billion in FY07 and small surpluses beginning in FY12. They put the total 10-year deficit projection of $832 billion. Ranking member on the House Budget Committee John Spratt (D-SC) said,

CBO's projections show the deficit making a decided improvement after 2010, but this results from expiration of the tax cuts passed in 2001, 2002 and 2003, a policy the Bush administration clearly does not support."

Sen. Kent Conrad (D-ND) of the Senate Budget Committee added,

The thing that really alarms me is the growth of the debt. Remember, while we see a deficit this year in the $360 billion range when you put in the need to fix the alternative minimum tax and you put in the additional war cost, what is being lost, I believe, in terms of helping the American people understand our fiscal condition, is the debt is growing much more rapidly than the deficit.

Stan Collender, contributing editor of the National Journal, makes two excellent points calling out the White House for their faulty and ideological budget projections in his January 17 column Wolf! (subscription only). Collender has previously called attention to the misleading projections being churned out by OMB during the Bush administration and recommended a very high dose of skepticism when considering OMB budget forecasts (an issue OMB Watch has also highlighted frequently).

In his column, Collender states the White House has almost zero credibility on budget projections and writes there is more to the recent White House's release of the estimated budget deficit than meets the eye:

The White House's announcement of a possible $400 billion deficit estimate was for the current fiscal year -- 2006 -- rather than for the 2007 budget it will send to Congress in early February. That makes it possible, perhaps even likely, that the administration is trying to set us up for a 2007 budget proposal that will show a deficit higher than the $319 billion recorded in 2005 but lower than the new estimate of $400 billion in 2006. That would allow the president and his economic team once again to claim credit for making progress even though 2007 would actually be a retreat from 2005 results.

In addition, the White House has begun to try and blame increased spending for hurricane relief as the main culprit in the increasing deficit in order to deflect attention from the huge cost of additional tax cuts, another round of funding for Iraq and Afghanistan, and the first year of the new prescription drug benefit.

The continued use of smoke and mirrors around the administration's federal budget forecasts is a shame. President Bush has shrifted responsibility and side-stepped addressing the serious long-term fiscal problem the country faces by putting political considerations above honest analysis with regard to America's finances. We all deserve better.

The federal government posted a budget surplus for December, 2005 for the first time since 2002, according to the Treasury Department. A surge in corporate tax revenues pushed total federal revenues for the month to $241.88 billion, while government spending rose at half the rate of revenues to $230.9 billion.

Despite this positive sign, budget forecasters are still expecting the annual deficit to rise for FY 2006 by anywhere from $50 billion to possibly over $100 billion by the end of the fiscal year. This is mostly due to increased federal spending after Hurricane Katrina, but also because of a continuation of tax cuts, mostly benefiting the wealthy.

The release of the President's budget is less than a month away, and Treasury Secretary John Snow has made it clear the budget will "call for sacrifices, no doubt about it." Like last year's "tough budget," this year's slicing and dicing is an attempt by the administration both to appear tough on spending, as well as help them pare the down the deficit -- a whopping $318 billion last year -- even further.

While reducing the deficit is something this administration should focus on, it's important not to forget the major cause of the huge deficits we have seen the over last few years: Bush's 2001 and 2003 tax cuts. Through FY 2005, the Bush tax cuts enacted since 2001 have cost $819 billion. And extending these tax cuts, a move Bush plans to fight for this coming year, would cost $2.1 trillion through 2015. If this administration were truly dedicated to paring down spending and truly willing to ask people to "make sacrifices," they would be less focused on slashing already-meager funding for government programs, and more focused on reducing the hundreds of billions of dollars spent being spent on tax cuts per year ($225 billion last year alone). By focusing on the budget for sacrifices, as opposed to the tax cuts, the administration makes it quite clear that they are more comfortable with taking from low- and moderate-income families than they are with taking from the super-wealthy.

While talking to reporters about the budget yesterday, Snow also mentioned that other priorities for 2006 include passing a pension reform bill, tougher regulatory standards for government-sponsored enterprises such as Fannie Mae or Freddie Mac, and increasing the debt ceiling.

Last April Congress called for an increase in the debt limit -- the national debt is expected to hit $8,184 billion in mid-February -- however they have yet to act. Lawmakers are expected to take up the issue in February after voting on final tax and budget reconciliation bills, marking the fourth time during President Bush's presidency the debt limit has needed to be raised. In a recent letter to Congress, Secretary of the Treasury John Snow said that unless the debt ceiling is raised by mid-March, "we will be unable to continue to finance government operations."

Raising the debt ceiling has no immediate economic consequences, but instead indicates the instability of Bush and Congress' long-term fiscal policy. In 2010 the national debt is forecasted to be 70 percent of GDP. And pressure for the government to spend will only grow more as baby boomers retire and place new demands on both Social Security and Medicare. As Douglas Holtz-Eakin, former head of the Congressional Budget Office stated,"It's not where we are. It's the trajectory we're on." Lawmakers need to put an end to their reckless spending -- Bush's 2001 and 2003 tax cuts alone are costing the country hundreds of billions of dollars every year -- so that we can put an end to this downward spiral of fiscal irresponsibility.

Here is how the debt limit has been increased during the Bush presidency:

• June 2002: ceiling raised from $5.95 trillion to $6.4 trillion
  
  
• May 2003: ceiling raised to $7.4 trillion
  
  
• November 2004: ceiling raised to $8.184 trillion

Over the past fifty years lawmakers have raised the ceiling over seventy times, however never by the amounts quite like we have seen over the past four years.

The Congressional Budget Office released the Monthly Budget Review on Friday, in which they reported the federal budget deficit for the first quarter of 2006 as being $119 billion. This figure is fairly close to the shortfall seen in the first quarter last year.

Increased spending in the wake of the hurricanes was responsible for some of the deficit, however those outlays were countered by somewhat high corporate tax receipts. Most corporations make their quarterly corporate income tax payments in December, which makes it a good month for the federal budget.