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War Costs Expected To Balloon Deficit

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By ANDREW TAYLOR, The Associated Press

Published: February 2, 2008

WASHINGTON - President Bush wants to cut funding for teaching hospitals and freeze medical research in a $3 trillion budget for 2009 that is still likely to generate a record deficit once war costs are tallied up.

The Bush budget to be submitted Monday would cut the budget for the Health and Human Services Department by $2 billion, or 3 percent. By contrast, the Pentagon would get a $35 billion increase to $515 billion for core programs, with war costs additional.

With tax revenue falling as the economy slows, and with the deficit-financed economic stimulus bill adding more than $150 billion in red ink to federal ledgers over 2008-2009, the White House acknowledges that the budget deficit for this year and next is projected to reach $400 billion or more.

The largest-ever budget deficit, $413 billion, was recorded in 2004.

Bush's budget will forecast a deficit for 2009 that's below that, an administration official said. That assumes costs of $70 billion for the wars in Iraq and Afghanistan, well below the almost $200 billion request for this year.

Even if the next elected president begins troop withdrawals, tens of billions of dollars more will be needed, which would bring the deficit well above the $413 billion record.

If the economy slides into recession, deficits would grow ever higher. The Bush budget predicts gross domestic product growth of 2.9 percent for 2008, an administration official said, much higher than private sector economists predict. If growth doesn't meet administration expectations, the deficit would spike higher as tax revenue falls even more.

Economists say the best way to measure the deficit is against the size of the economy, and at about 3 percent of gross domestic product, the 2008-2009 deficits aren't much higher than historical averages. To the average member of the public, however, the raw figures are eye-popping, and Bush's successor is likely to feel pressure to rein the deficit under control.

Bush has promised his budget will keep the government on track to run a surplus in 2012. The steps required to do that and keep his promise to extend tax cuts enacted in 2001 and 2003 beyond their expiration at the end of 2010 are hardly realistic.

For starters, his budget contains no war costs beyond 2009 and fails to address the huge cost of keeping more and more taxpayers from feeling the bite of the alternative minimum tax.

Bush's budget plan will also, on average, freeze most domestic programs funded by Congress each year. Since departments such as Veterans Affairs and Homeland Security will be getting increases, that means other agencies would bear difficult cuts.

The $2 billion in HHS cuts are about double the size of the reductions Bush sought last year; Democrats controlling Congress rejected them.

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