US Budget Deficit On Course for Alltime Record

27 January 2005

George W Bush's promise to halve America's yawning budget deficit by the end of his second term is wishful thinking.

This is not the opinion of the president's political opponents but the non-partisan Congressional Budget Office, which on Tuesday published data suggesting the Bush administration will struggle to meet its promise.

According to White House predictions, the deficit will reach a record $427 billion (€326.43bn; £226.73bn) by the end of this year. That figure includes an additional $80bn sought from Congress to fund global military operations - primarily in Iraq and Afghanistan, plus the seven hundred or so military bases maintained by the US in 130 countries around the world.

But the CBO warns that - even excluding the spiraling costs of the "war on terror" - the projected ten-year deficit has increased by $500bn to $1,364bn, primarily due to the decision to extend the child tax credit. The CBO also stressed that its forecasts would be affected by the strength of the economy and changes in legislation.

It gets worse. Analysts say the new figures fail to take into account the potential $2-$3.8 trillion costs of the president's plan to revamp state pensions and extend tax cuts. The figure could also be exacerbated by any further military costs.

Data sourced from BBC Online and Financial Times Online; additional content by WARC staff