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In one respect the Bush administration's most recent estimate of the fiscal 2003 deficit - $455 billion - is hardly newsworthy.

Ever since President Bush's budget was sent to Congress earlier this year, it has been assumed that the White House's original $304 billion deficit forecast grossly underestimated the true total. A deficit of $400 billion or higher was generally thought likely, and so few involved with the federal budget have talked much about it.

But that tacit agreement among budget analysts and observers does not make the sheer magnitude of the Bush administration's official $455 billion deficit forecast any less shocking.

This is not simply an incremental increase over the February estimate; it is 50 percent higher than the previous forecast.

Nor is this just an incremental change from the previous all-time record; it is 57 percent more than the $290 billion deficit recorded in fiscal 1992.

And, contrary to Bush administration claims, as a percentage of the U.S. economy the fiscal 2003 deficit is absolutely in the same ballpark with the record post-World War II highs from the Reagan administration. In 1983, the on-budget deficit - that is, not including Social Security - was 6 percent of GDP. The midsession review just released by the Office of Management and Budget shows that the on-budget deficit will be 5.7 percent of GDP. It is also the highest on-budget deficit since 1983 and the second-highest since 1946.

But as shocking as the new fiscal 2003 estimate may be, the most astounding numbers in the Bush administration's midsession review are the new deficit estimates for 2004 and beyond.

In fiscal 2004, the White House now says that the deficit will increase to $475 billion. It is then expected to shrink the next couple years, but never falls below $213 billion and starts to rise again in 2008.

Between fiscal 2004 and 2008, OMB projects that the deficit will average more that $290 billion. In other words, in nominal terms the deficit over each of the next five years will average more than the previous record high.

All of this is even more astounding because the numbers already assume significant economic growth and spending restraint:

• GDP is projected to increase by an average of 3.4 percent a year between 2004 and 2008.
• Discretionary spending - the part of the budget that is most controllable by the White House and Congress - is projected to grow by an average of only 2.1 percent.
• Total spending - including entitlements and the interest payments on the rapidly increasing public debt - is projected to grow by only 4.5 percent a year.

This means that the White House's new and dramatically higher deficit estimates likely understate what we're going to see over the next five years, unless economic growth is far stronger and spending restraint is much greater than the administration's very optimistic assumptions. It also means that, contrary to the official White House position, we will not be able to deal with the federal deficit through economic growth and spending restraint alone.

Moreover, the administration's $475 billion fiscal 2004 deficit projection does not include any of the spending that will be needed to maintain a U.S. military presence in Iraq or Afghanistan, which is currently costing the U.S. about $1 billion a week and is expected to continue for quite some time. It doesn't include the virtually inevitable pressures from Congress to spend more on domestic and homeland security programs than the low levels the White House is assuming. And finally, it is based on a 3.7 percent growth rate for the economy in fiscal 2004 - the highest that is assumed over the entire 2004-2008 period.

As a result, it is not hard to come up with a scenario where the 2004 deficit will be closer to $600 billion than the $475 billion the administration is projecting.

Then again, missing the 2004 deficit forecast by 26 percent would be a startling improvement over the 50 percent underestimate the administration now says it made in 2003.

Question Of The Week

Last Week's Question. What's the first day any of the 13 regular appropriations for a fiscal year can be enacted? Appropriations are generally considered one year at a time, and House and Senate rules require the budget resolution for a year to be adopted before Congress may consider any of that year's appropriations. Neither of these is a statutory requirement, however.

That means that the answer is... Congress does not have to wait for a particular day in a particular year to pass an appropriation. Even though it is still fiscal 2003, and Congress and the president are working on the 2004 appropriations, no law prohibits them from also enacting an appropriation for 2005 or any year thereafter. In fact, if the United States had a biennial budget, Congress and the White House would be expected to enact an appropriation for 2004 and 2005 at the same time.

Only a handful of people got this one right. The winner of the "I Won A 2003 Budget Battle" mouse pad, who was chosen at random from this very select group, is Don Spooner of the National Labor Relations Board in Philadelphia.

This Week's Question. No matter what your politics or where you work, this is a question that won't get you in trouble if you send in an answer. The question: In terms of the dollars collected in fiscal 2002, what are the top four sources of federal receipts?

Click here to send in your response. Your answer must be received by 5 p.m. PDT on Saturday, July 26, 2003. If there are similar winning answers, the "I Won A 2003 Budget Battle" mouse pad will go to the person selected at random from all those who submit the correct response. You must include your mailing address so the mouse pad can be sent if you are the winner.

Note to government employees: Because of security procedures at many offices and facilities, your home address will be the best way to make sure the mouse pad actually gets to you.

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COMMENTS

• Let me add that, if Congress doesn't wake up and put a halt to this administration, we can do it at the polls. GovExec.com reader Posted August 1, 2003 2:28 PM
• This bill burdens our children and grandchildren with our greed. We have to get rid of George the third and his fellow conservatives that spend like there is no tomorrow and reduce taxes at the same time. The Bush programs are ridiculous and not worth the burden he is asking us to place on our grandchildren. Now he wants to invade Africa. Congress you better wake up and stop this guy! GovExec.com reader Posted July 23, 2003 6:32 AM
• Stan is upset about the deficit. We get it. We get it over and over again. I would much prefer to read about the fiscal 2004 budgeting processes underway, which affect my daily work, instead of column after column critising the policies of this administration. If Stan must hold forth, let's at least ask him to fix his logic. He puts up his projected 2.1 percent rise as the only place we could control discretionary spending, ignoring a massive base that could surely be cut. Thanks for the opportunity to comment. GovExec.com reader Posted July 23, 2003 8:36 AM

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