Bush's Touted Deficit Reduction to Be Reversed by 2007
RAW STORY
Published:
Wednesday July 12, 2006
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The reduction of the budget deficit to $296 billion, touted by President George W. Bush in a White House ceremony yesterday, will be completely reversed by 2007, RAW STORY has learned.
A report in today's Wall Street Journal shows that by 2007, the budget deficit will rise to $339 billion. The projection was offered by the White House's own Office of Management and Budget, the source of yesterday's numbers on deficit reduction.
OMB's Director Rob Portman pointed to several causes for the resumption of growth in the deficit: declining revenue from the elimination of the telephone excise tax and changes to the alternative minimum tax, and a large outlay of funds for post-hurricane reconstruction in the Gulf states.
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But economic-policy experts said that while the Bush tax cuts have helped spur some economic growth, they aren't going to create enough growth either to solve the nation's long-term fiscal challenges or to erase what is still a significant budget deficit.
"On the one hand, it's clearly the case that the tax cuts have stimulated some economic activity . . . but it's still the case that there's a big deficit and that fiscal discipline has been lacking," said Kevin Hassett, director of economic policy studies at the conservative American Enterprise Institute.
The deficit is projected to widen again in 2007 to $339 billion, in large part because revenue growth is expected to slow. Mr. Portman said the Treasury Department is estimating just 2.4% revenue growth for 2007, a figure he labeled "conservative." But he said federal coffers will feel a pinch in 2007 in part because of lost tax revenue from the elimination of the telephone excise tax, which will cost between $26 billion and $28 billion, as well as changes to the alternative minimum tax.
In addition, Mr. Portman said the federal government expects to spend about $223 billion this year "in responding to hurricanes that hit the Gulf Coast."
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