Annual Federal Budget Deficit to Fall for Third Year in a Row

The U.S. federal budget deficit will fall for the third year running, totaling $158 billion in fiscal-year 2007, the Congressional Budget Office estimated. The budget deficit for fiscal year 2006 was $248 billion.

The White House and congressional Republicans are likely to point to the latest estimates as proof that President Bush’s fiscal policies are working and that, on the whole, the nation’s economy remains strong.

The new estimate is a $19 billion improvement in the outlook since March, when CBO predicted an annual budget deficit for 2007 of $177 billion. CBO also predicted that despite recent market disruptions, the nation’s economic outlook remains “sound.” It predicts real GDP will grow by 2.1% in 2007 and by 2.9% in 2008.

Federal Budget Deficit

CBO expects the 2007 deficit to total $158 billion, $90 billion decline from the deficit recorded for 2006.

“The policies of low taxes and spending restraint have produced a clear and measurable record of success,” Bush told reporters last month when the White House unveiled it’s mid-session budget review. “You can’t argue with what I’m telling you. These are the facts.”

But congressional Democrats and budget hawks say there’s really little to cheer about, noting that Congress will have to vote again this fall to raise the federal debt limit because of on-going annual budget deficits. “In total, the nation’s debt has already climbed by more than $3 trillion under President Bush — much of it borrowed from foreign nations like China and Japan,” said Senate Budget Committee Chairman Kent Conrad (D., N.D.). “I don’t hear anyone in the administration crowing about that statistic.”

In any case, Bush, Conrad, and most others involved in the budget debate in Washington agree that whatever the short-term budget picture, the nation’s long-term fiscal policies remain dangerously unbalanced. “Over the long-term, the budget remains on an unsustainable path,” CBO wrote in its report Thursday. The estimate is based upon actual data on receipts and expenditures through the first three quarters of the fiscal year and estimates of such data for the last quarter.