Economy, S&L; Bailout Seen Driving Up Deficit : Budget: Estimates put the figure at a record $320 billion in this fiscal year, but it is likely to start shrinking in ’93 as plan to cut spending takes effect.

A weakening economy and skyrocketing costs of the savings and loan bailout will raise the federal budget deficit to a record $320 billion in this fiscal year, the Congressional Budget Office estimated Thursday.

The deficit will surge even higher in the fiscal year starting Oct. 1, despite Congress’ five-year agreement to reduce red-ink spending, CBO Director Robert D. Reischauer told the House Budget Committee.

Even if there is a recession in the first half of next year, however, the deficit will start to shrink in 1993 and drop sharply thereafter as the new congressional budget actions take hold, Reischauer said.

“Even allowing for some additional deterioration in the economic outlook, by fiscal year 1995, the total federal deficit is likely to fall below $100 billion for the first time in 14 years and below 1% of GNP (gross national product) for the first time in 20 years,” he said.

The CBO calculations were the first official indication of how the $496-billion deficit-reduction plan approved in the waning days of the 101st Congress will affect the federal budget over the next several years. Estimates from the Bush Administration are not expected until February.

Reischauer said that the CBO figures are tentative because of the uncertainty over the economy and possible military action in the Persian Gulf crisis.

Rep. Leon E. Panetta (D-Carmel Valley), Budget Committee chairman, expressed frustration about the panel’s unsuccessful efforts to get an estimate of the cost of deploying American troops in Saudi Arabia as part of Operation Desert Shield.

The Pentagon and the State Department refused to appear at Thursday’s hearing to testify about their current spending levels, Panetta said.

Reischauer said that the CBO estimated that the second deployment of U.S. forces would add $4.5 billion to Desert Shield costs, on top of $12 billion in extra outlays.

But unanswered questions about the Persian Gulf crisis only add to the already difficult task of predicting future budget deficits.

“The economy appears to be at a turning point--a time when predicting its course is particularly difficult,” Reischauer said.

He added that while the current quarter will show negative growth--signaling a possible recession--the outlook for the first quarter of 1991 is hard to forecast. Economists generally define a recession as two back-to-back quarters of negative growth.

“The short-term budget outlook is worse than when CBO issued its report last July (but) the longer-run picture has improved,” Reischauer added. He said that the changes reflect both increases caused by the worsening economy and the savings and loan crisis and decreases attributable to the budget agreement.

By including the Social Security trust fund surplus in the calculations, the federal deficit would be $253 billion in the current fiscal year and rise to $262 billion in the following year, the CBO figures showed.

Without that Social Security cushion, however, the deficit would be $320 billion this fiscal year and climb to $337 billion in the next 12-month period, according to the CBO projections.