Reuters - A falling U.S. budget deficit brought some solace on Friday to Republicans beset by a Washington sex scandal, violence in Iraq and possible political setbacks in the November congressional elections.
A falling U.S. budget deficit brought some solace on Friday to Republicans beset by a Washington sex scandal, violence in Iraq and possible political setbacks in the November congressional elections.
The latest bit of good news came from the nonpartisan Congressional Budget Office, which said the fiscal 2006 budget deficit totaled about $250 billion in fiscal 2006, down from the previous year's $318 billion.
Republicans seized on the lower deficit number -- and a jobs report showing the unemployment rate fell to 4.6 percent -- at the end of a week dominated by political problems stemming from an ex-Republican congressman's improper contacts with House pages.
House Budget Committee Chairman Jim Nussle, an Iowa Republican running for governor of that state, credited the falling deficit to "pro-growth policies." But he warned, "We've got to remain diligent in our efforts to keep our economy strong and restrain federal spending."
The upbeat economic developments were tempered by a statistic that could agitate conservatives: Government outlays rose a whopping 7.5 percent over the previous year, CBO said.
In August, CBO estimated the fiscal 2006 deficit at $260 billion. "The estimated deficit is about $10 billion lower than CBO projected this summer, primarily because of receipts of corporate income taxes were greater than expected," the office said.
All receipts in 2006 were up about $253 billion, 11.8 percent higher than in 2005 when revenues shot up 14.5 percent, CBO said.
The fiscal 2006 deficit is significantly lower than the all-time U.S. budget deficit record of $413 billion in 2004.
Rebuilding southern coastal states after last year's Hurricane Katrina, financing wars in Iraq and Afghanistan and bolstering domestic security have made it difficult to restrain spending, especially in an election year. An expensive, new prescription drug benefit for seniors also kicked in this year.
CBO said government outlays this year were 7.5 percent above 2005 levels, making spending equal to about 20.3 percent of GDP in fiscal 2006. That is up from the 19.6 percent average over the past five years, CBO said.
The growth in federal spending has angered conservative Republicans in Congress, who want to continue President George W. Bush's tax cuts and maintain a robust defense budget while paring domestic spending.
But a push back by moderate Republicans, many of whom think social programs are being cut too deeply, has resulted in a deadlock in the Republican-controlled Congress over the budget and some spending bills for fiscal 2007.
Rep. John Spratt (news, bio, voting record) of South Carolina, senior Democrat on the House Budget Committee, said the $250 billion deficit in fiscal 2006, which ended September 30, adds to skyrocketing U.S. debt.
"A growing portion of taxpayer dollars is being spent to pay the interest on this mountain of debt, nearly 45 percent of which is now held by foreign investors," Spratt said.
Spratt's concerns were backed by CBO, which noted, "Escalating interest costs, up by $45 billion or 24 percent, also had a significant impact on spending growth" last year.
Despite back-to-back years of falling deficits, the long-term picture is not bright, according to some experts.
The U.S. Government Accountability Office last month warned of "ever-larger deficits resulting in a federal debt burden that ultimately spirals out of control." Much of the concern centers on growing health care and retirement benefit costs for an aging population.
10-06-2006, 04:50 PM
