Budget Seen Heading for Triple-Digit Deficits; Revenue Decline, Spending Increase cited.(NATION)

The Washington Times (Washington, DC), May 10, 2002 | Go to article overview

Budget Seen Heading for Triple-Digit Deficits; Revenue Decline, Spending Increase cited.(NATION)


Byline: Patrice Hill, THE WASHINGTON TIMES

The budget outlook is rapidly deteriorating because of declining revenue and escalating congressional pork-barrel spending, with some on Wall Street predicting a return to triple-digit deficits "as far as the eye can see."

In comments to reporters yesterday, President Bush acknowledged the trend that has prompted the White House to issue veto threats over excessive spending measures, including the emergency spending bill and provisions of the House defense bill.

"The economy is beginning to come back, but certainly not as strong as I would like. And until the economy comes back as strong as it can, our revenues aren't going to be as good as they should be," Mr. Bush said.

White House budget Director Mitchell E. Daniels Jr. said the unprecedented decline into triple-digit deficits within a year of posting triple-digit surpluses is not likely to end in 2004, as he previously predicted, because the government's main sources of revenue are not bouncing back like the rest of the economy.

"We get so much of our income from high-income people," Mr. Daniels said in an interview with Bloomberg News. "These same people derive a lot of their income from capital gains, bonuses or stock options. Simply getting the economy out of recession quickly may not be enough to bring back the government's revenue."

The White House has been forced to revise its budget forecast because of the dramatic falloff of tax receipts in April, a critical month when upper-income taxpayers filled the government's coffers in past years with last-minute tax payments.

This year, rather than owing money, many found they were due large tax refunds because their incomes shrank and they sustained sizable losses in the stock market. The declining revenue trend started last year but accelerated considerably this spring.

Many private analysts say the plunge in receipts is not merely a temporary result of the recession. Few expect the stock market to return to the double-digit growth that helped produce the huge revenue windfalls that created the surpluses in the late 1990s.

The recession and Enron scandal are keeping a lid on executive compensation gains that are taxed at high rates. And corporate profits, another important source of revenue, largely vanished in the last year.

Mr. Daniels warned that the president won't bow to election-year pressures to accommodate lawmakers' efforts to enlarge the president's $27.1 billion emergency spending request. Republicans and Democrats alike have larded such spending bills in bids to extend their control of Congress this year. …

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