White House, Hill budget office trade estimates of shrinking surplus

President Bush's fiscal 2003 budget will project a 10-year unified budget surplus of about $2.2 trillion, a forecast of $600 million more in black ink than the Congressional Budget Office predicted today, according to Office of Management and Budget Director Mitch Daniels.

Daniels, who convened a hastily staged briefing for reporters at the White House to respond to CBO estimates unveiled on Capitol Hill, also said the fiscal 2002 deficit would amount to $106 billion.

While the 10-year estimate assumes no policy changes, the 2002 prediction assumes enactment of Bush proposals, including a stimulus package costing about $90 billion. Daniels also indicated that a modest supplemental bill would probably be necessary during fiscal 2002 to add funds for combating terrorism.

For fiscal 2003, the deficit would decline to $80 billion, OMB predicted. The first surplus of $54 billion would occur in fiscal 2005, after the budget is nearly balanced with a deficit of $14 billion in fiscal 2004.

Daniels indicated the 10-year number, which covers fiscal years 2002 to 2011, is higher than the CBO forecast because CBO assumes lower revenues. Also, the administration assumes in its baseline a higher starting point, including in its estimate emergency spending last year that CBO did not, according to Daniels.

The difference occurs even though OMB assumes slightly slower rates of economic growth than CBO. For fiscal 2002, OMB projects a growth rate of 0.7 percent, rising to 3.8 percent in fiscal 2003. During the decade beginning in FY03, OMB predicts a unified surplus of $2.9 trillion.

However, if the tax cut passed last year is renewed, the fiscal 2003-2012 surplus drops to about $1 trillion, Daniels said.

White House Press Secretary Ari Fleischer today dismissed criticism that the tax cut had helped deplete the surplus.

"At the end of the day, the government, instead of having a gargantuan surplus, will now have a very large surplus," Fleischer said. "The purpose of government is not to keep taxes high on the American people so the government can run gargantuan surpluses that get spent anyway," he added.