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Budget Deficit Narrows To $205 Billion

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Jul 11, 2007 10:15 am US/Eastern

Budget Deficit Narrows To $205 Billion

CBS News Interactive: Eye On The Economy

WASHINGTON (AP) ―

Click to enlarge 1 of 1: Despite the improvements, the deficit picture remains worse than when Bush took office six years ago. (File)
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CBS News Interactive: Eye On The Economy

The nation's budget deficit will drop to $205 billion in the fiscal year that ends in September, less than half of what it was at its peak in 2004, according to new White House estimates.

It's also a gain over the $244 billion predicted by President Bush in February, but not as great an improvement as anticipated by other forecasters.

Bush planned to discuss the figures in an afternoon appearance as the White House's Office of Management and Budget as part of its midyear update of the budget picture.

The deficit last year was $248 billion and has closed in recent years due to impressive revenue growth from the healthy economy. Bush and Democrats in Congress have both promised to erase the deficit by 2012, though they have greatly divergent views on how to achieve the goal, with Bush and Republicans insisting on extension of his 2001 and 2003 tax cuts when they expire at the end of 2010.

The latest figure is in generally in line with expectations, as the early quarters of the 2007 fiscal year that began in October had shown continued revenue improvements. But the pace of such revenue growth has slowed more recently, according to the Congressional Budget Office.

CBO, which makes budget predictions for Congress, has estimated the deficit for the ongoing budget year will range from $150-200 billion.

The deficit peaked at $413 billion in 2004, though economists say the best way to measure the deficit is in relation to the size of the economy. By that standard, the current deficit, at 1.5 percent of gross domestic product, is the lowest since 2002.

Despite the improvements, the deficit picture remains worse than when Bush took office six years ago. Then, both White House and congressional forecasters projected cumulative surpluses of $5.6 trillion over the subsequent decade.

But a revenue bubble burst, a recession and the Sept. 11, 2001, terrorist attacks adversely affected the books. Several rounds of tax cuts, including Bush's signature $1.35 trillion 2001 tax cut, also contributed to the return to deficits in 2002 after four years of budget surpluses.

"Nothing in the administration's deficit announcement changes the failed fiscal record of President Bush," said Senate Budget Committee Chairman Kent Conrad, D-N.D. "He has increased spending by nearly 50 percent since taking office, while at the same time repeatedly cutting taxes primarily on the wealthiest."