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Bush, Congress Face Historic Deficits 

By ALAN FRAM, Associated Press Writer

WASHINGTON - Federal deficits are setting records as President Bush and Congress plunge into the election year's budget work and both parties wonder if the red ink will prove to be a campaign issue.

The Congressional Budget Office planned to release its annual winter budget and economic outlook on Monday. It was expected to be a bit better in the short term than the CBO's last update in August, when it projected shortfalls of $480 billion for this year and $341 billion for 2005.

"Even if in a small way, this could be the first good news budget report we've had in some time" because the growing economy should make deficit projections smaller for the next two years, said Hazen Marshall, Republican staff director of the Senate Budget Committee.

The August report also envisioned deficits totaling $1.4 trillion over the decade ending in 2013, assuming lawmakers make no changes in tax law and spending grows only at the rate of inflation. Analysts said they expected the update by Congress' nonpartisan fiscal analysts to have a similar 10-year projection.

The deficit hit $375 billion in 2003, the highest in dollar terms ever. The previous record was $290 billion in 1992.

Because tax and spending changes are inevitable, the forecasts are not meant as a prediction. Rather, they provide lawmakers with a baseline from which to measure the effect their policies would have on the budget.

Many analysts say the CBO's deficit projections will probably prove too low especially in the long-term because they omit spending the president and Congress are likely to approve.

These include making at least some tax cuts permanent, changing the alternative minimum tax so it doesn't affect growing numbers of middle-income earners, and spending increases for popular programs or unforeseen needs like war or disasters.

The projections also assume that $87.5 billion earmarked last November for wars in Iraq and Afghanistan will be approved anew every year throughout the decade which is unlikely to prove true.

The budget office was unveiling its latest estimates a week before Bush sends lawmakers his $2.3 trillion budget for the 2005 fiscal year, which begins this Oct. 1.

Bush has said one of his goals is to cut the deficit in half by 2009, but so far he has provided no specific plan for doing so.

The two parties are already fighting over the red ink that has materialized during the current administration, and that looms ahead as far as experts can see.

"They have significance because they are record deficits," North Dakota Sen. Kent Conrad, top Democrat on the Senate Budget Committee, said of the expected projections. "The thing of greatest concern is we don't see any end in sight under the president's policies."

The budget's health has taken an abrupt nosedive after four straight years of annual surpluses that ran through 2001.

Only a year ago, the CBO estimated 10-year surpluses not deficits of $1.3 trillion. And in January 2001, when Bush took office, the projection was for a decade of black ink totaling $5.6 trillion.

Republicans say Bush is not to blame for the turnabout. Analysts say the surpluses have dissolved due to the recession, the tax cuts Bush pushed through Congress and growing spending for defense, Medicare and other programs.

Even so, many Republicans have grown increasingly uneasy with the shortfalls. The public has mostly ignored the budget gaps, focusing instead on the economy, war and terrorism, but recent polls indicate people are paying more attention.


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