The deficit number for the current fiscal year [FY2008], which ends Sept. 30, is now projected to be $389 billion, or 2.7 percent of GDP. That is down from the $410 billion projected initially. But it is still higher than the final fiscal 2007 deficit of $162.8 billion and [the increase from 2007] is mostly due to the economic slowdown.
(Note that although the $389 billion is down from the Administration’s earlier projection of a $410 billion deficit for this fiscal year, it’s up from CBO’s March projection of $357 billion. Some cynics have pointed to the Administration’s past track record of repeated overstating of the deficit as a strategy designed to give the appearance of fiscal responsibility.)
…and now, the bad news:
The Bush administration is now projecting a budget deficit of $482 billion in fiscal 2009 — a record high in dollar terms.
The previous record was $412.7 billion in fiscal 2004.
David is quick to point out (as does the Administration) the fallacy in considering this a real record, however:
The better way to gauge the size of the deficit, according to economists, is as a percentage of gross domestic product (GDP). Deficits in the mid-1980s were in the 5 percent range. In that light, the fiscal 2004 figure, 3.6 percent of GDP, was not particularly high by historical standards. The projected 2009 deficit would be 3.3 percent of GDP.
The Administration’s new projection of a $482 billion FY2009 deficit represents a $75 billion increase from their February projection of $407 billion–$49 billion coming from lower revenues (a combination of the cost of the stimulus and assumptions of a weaker economy) and $26 billion from higher outlays (mostly from the supplemental appropriations act which included war funding, emergency funding, and veterans’ educational benefits). I haven’t yet read enough of the report to be able to say if that number seems like a “low ball” or a “high ball” number.
UPDATE (10 pm): Apparently former Treasury Secretary Paul O’Neill thinks it’s a “low ball” number, according to Jonathan Weisman’s story in Tuesday’s Washington Post:
“That’s not the real number,” former Bush Treasury secretary Paul H. O’Neill said of the $482 billion deficit forecast. “It’s upward of $500 billion and counting. It’s a mind-boggling number.”
…and here’s a link to a CNN video story featuring Concord’s Bob Bixby (aka my boss).
The Administration still claims their policies would produce a small budget surplus in fiscal years 2012 and 2013, but that’s calculated on a baseline that assumes an ever-growing Alternative Minimum Tax and conservative growth in discretionary spending (including war spending). With the usual adjustments for realistic policy, I think it’s more likely that there would remain a deficit in 2013 of over $400 billion.
Note that with the current year deficit a bit lower than $400 billion now, that tightens the Obama campaign’s 2013 deficit target a bit, given that Austan Goolsbee had claimed an Obama Administration would achieve a lower (nominal) deficit in 2013 than the current year deficit. On the other hand, the Obama campaign has also adopted the realistic “policy extended” baseline as their baseline, and has only pledged to pay for their new initiatives relative to this baseline. (No matter that this won’t help them when it comes to actually legislating under the PAYGO rules, which calibrate to the current law baseline.) So under either benchmark, the Obama campaign seems to be fairly consistently setting a target 2013 deficit of right around $400 billion–maybe plus or minus $50 billion.