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War spending may send federal deficit to record $427 billion

WASHINGTON – Additional war spending this year will push the federal deficit to a record $427 billion for fiscal 2005, effectively thwarting President Bush’s pledge to begin staunching the flow of government red ink, according to new administration budget forecasts unveiled Tuesday.

Administration officials rolled out an $80 billion emergency spending request, mainly for Iraq and Afghanistan, conceding the extra funds would likely send the federal deficit above the record $412 billion deficit recorded in fiscal 2004, which ended Sept. 30. Bush has pledged to cut the budget deficit in half by 2009, a promise the administration insists it can keep. But at least for now, the government’s fiscal health is actually getting worse.

“We must get serious about putting our financial house in order, beginning with short-term deficit reduction and then long-term control of entitlement spending,” said Senate Budget Committee Chairman Judd Gregg, R-N.H. “If we do nothing, our kids and grandkids will be overwhelmed by the cost of our inaction.”

In separate briefings, administration officials detailed the rising cost of war while the nonpartisan Congressional Budget Office released its deficit forecast for the coming decade. Taken together, the briefings painted a sobering picture of the government’s financial strength, even in the face of a growing economy and rising tax receipts. The figures suggest the Bush administration will continue to have difficulty reining in federal deficits as long as war is draining the government’s coffers.

“There is no question that (the insurgents), with relatively small expenditures, are proving themselves to be able to force us into much larger ones,” one senior administration official said.

Of the $80 billion request, at least $75 billion would fund the wars in Iraq and Afghanistan this year. An additional $5 billion would go toward building an embassy in Baghdad, continuing reconstruction in Afghanistan, offering assistance to the Palestinians and sending relief to the Darfur region of Sudan. That $80 billion would come on top of $25 billion already appropriated for the war this year, pushing the total cost of fighting to $105 billion, up from $88 billion in 2004 and $78.6 billion in 2003.

“Our troops will have whatever they need to protect themselves and complete their mission,” President Bush said in a statement. The latest war request would push the total cost of military operations in Iraq, Afghanistan and other efforts since the Sept. 11 attacks to $277 billion, according to the CBO. That figure well exceeds the inflation-adjusted, $200 billion cost of World War I, and is approaching the $350 billion cost of the Korean War, according to Commerce Department figures.

In a separate briefing, the director of the nonpartisan Congressional Budget Office said tax cuts and spending enacted last year by Congress will contribute an additional $504 billion to the government’s overall anticipated debt between 2005 and 2014. Additional debt over that decade should total $1.36 trillion, well above the $861 billion figure the CBO projected in September.

“We’re doing a little bit worse over the long term,” CBO director Douglas Holtz-Eakin said, “and it’s largely due to policy” changes.

A senior administration official told reporters that President Bush’s budget – to be unveiled Feb. 7 – will show the government on track to cut the budget deficit in half from the White House’s initial deficit projection for 2004.

But the CBO projections cast significant doubt on that claim. In total, the CBO projected that the government will rack up another $855 billion in debt between 2006 and 2015, but Holtz-Eakin cautioned that figure almost certainly understates the problem. The total assumes no additional money will be spent in Iraq or Afghanistan over the next decade. Perhaps more important, CBO by law must assume Bush’s first-term tax cuts will expire after 2010, sending the government’s balance sheet from a $189 billion deficit that year to a $71 billion surplus is 2012.

The CBO forecast also excludes the cost of Bush’s promised overhaul of Social Security, which could add an additional $1 trillion to $2 trillion over the next decade.

Even with those favorable omissions, the CBO projected that Bush will miss his goal of cutting the deficit in half by 2009 from last year’s level. The 2009 deficit, excluding war and Social Security costs, is expected to drop to $207 billion, just over half of last year’s record $412 billion level, the forecast said.

“Having racked up three of the largest deficits in history, the Bush administration is years away from reducing the deficit by half or by any appreciable amount,” said Rep. John Spratt, S.C., the ranking Democrat on the House Budget Committee.


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