Budget deficit estimated at $157 billion

The federal government will record a total budget deficit of about $157 billion for fiscal 2002, the Congressional Budget Office reported Friday, attributing the red ink to "the largest percentage drop in revenues in over 50 years and the largest percentage growth in spending on programs and activities in 20 years."

It will be the first unified budget deficit since 1997 and a net change of $284 billion from the $127 billion surplus recorded last year. The deficit is about 1.5 percent of the gross domestic product, the largest since 1995 but below the 5 percent to 6 percent of the GDP recorded in the mid- 1980s.

CBO said spending outlays rose by an estimated $148 billion compared to last year, up 7.9 percent, while receipts fell by $137 billion or 6.9 percent.

The revenue decline was the largest percentage drop since 1946, most of it attributable to individual income taxes. CBO said it could not yet indicate which types of income were responsible for the drop, although capital gains are "expected to be an important factor." CBO said $30 billion of the loss was a result of last year's tax cut.

Defense outlays drove much of the spending increase, rising 13 percent, the fastest rate of growth since the early 1980s. Meanwhile, unemployment outlays were up 72 percent relative to 2001, the largest one-year increase since 1980.

Medicaid also climbed 13.2 percent, the biggest increase since 1992, and spending for other activities, including various discretionary and mandatory programs, was up 11.7 percent, the highest since 1990. Medicare and Social Security increases were "more in line with recent trends," CBO said.

Meanwhile, a Senate resolution to extend through fiscal 2003 various budget enforcement mechanisms, such as pay-go, should go to the floor next week, although it is still unclear whether the Senate can finish the bill before recessing.

Senate Budget Committee Chairman Kent Conrad, D-N.D., and ranking member Pete Domenici, R-N.M., will use as a vehicle for their plan a resolution already on the Senate calendar that says all appropriations bills must be completed before the start of a new fiscal year. The Senate is expected to invoke cloture on that resolution Wednesday, and Conrad and Domenici would then offer their plan as an amendment.

However, Sen. Phil Gramm, R-Texas, who has so far objected to letting the budget plan proceed to the floor, could try to amend it and delay the vote until a lame-duck session, if the Senate recesses next week.

"Hopefully, the opponents will see the writing on the wall" and let the resolution proceed, said a Senate Democratic aide, noting that the Conrad-Domenici plan has substantial support. But a Gramm aide said the senator will continue to object to the resolution on the grounds that it does not contain any caps on discretionary spending and will offer several amendments intended to slow down its consideration. Among those will language to make it easier to pass tax cuts if the Senate waives a point of order against any "budget-busting" spending increase, the aide said.