Budget Deficit Forecast Grows by $67.4 Billion : Economy: The Office of Management and Budget blames the recession, the S&L; crisis and the Gulf War in predicting a record $348.3 billion of red ink during fiscal ’92.

The combined impact of recession, the Gulf War and the savings and loan crisis will probably increase the federal budget deficit by a stunning $67.4 billion in the coming fiscal year, the White House estimated Monday.

In its annual midyear review, the Office of Management and Budget said the deficit in fiscal 1992, which begins in October, will hit a record $348.3 billion--far above the previous estimate of $280.9 billion, issued last February.

Apparently in an effort to downplay the grim news, the OMB announced the new figure late in the day, without calling its usual press conference. Senior OMB officials were not available to discuss the new forecast.

The figures will probably renew debate in Congress over the effectiveness of last fall’s budget agreement, which was supposed to lead to a sharp reduction in the deficit over the next five years.

Congress has been chafing under the agreement’s pay-as-you-go budget rules, which make it difficult to launch new spending programs. The new figures are likely to provide ammunition to critics who want to discard the accord as unrealistic.

The White House said the recession is at least partly to blame for the sharply higher deficit figure. The economic slump has led to lower profits for corporations and to more unemployment, which means that the government will take in less in taxes.

The review estimated Monday that as a result of the economic slowdown, federal tax receipts are likely to fall by $19.8 billion in fiscal 1992.

But the report said the increase stems from other factors as well:

* The rising costs of the thrift and banking crises are leading to a dramatic increase in the costs of the government’s deposit insurance funds, the Administration said. The rising costs of deposit insurance will add an extra $29.9 billion to the deficit next year.

* The continuing costs of the Persian Gulf crisis will add another $12 billion to the deficit in 1992, officials said.

Most of the contributions from U.S. allies coming to the Pentagon to help defray America’s costs in the Gulf War will help reduce the 1991 budget deficit.

But many of the remaining war-related costs that will come in 1992--replacement of equipment, the transfer of personnel and other expenses related to winding down the American presence in the region--will have to be paid directly out of the U.S. Treasury.

By contrast, the White House said the deficit for the current fiscal year should actually be slightly below the Administration’s earlier projections, largely because of the timing of many of the foreign contributions for the war.

In February, the White House predicted that the deficit for fiscal 1991 would hit a record $318.1 billion, partly in anticipation of heavy military costs from the Persian Gulf crisis.

But on Monday, the Administration said that the deficit in the current year will only rise to $282.2 billion and that the savings will come largely because the war did not cost American taxpayers as much as expected.

The government’s net spending on the war in fiscal 1991--the total cost minus the allied contributions--was $33.4 billion less than the Administration anticipated in February, OMB said Monday.

In fact, allied contributions actually exceeded U.S. spending on the war during fiscal 1991, the White House acknowledged. The Pentagon estimates that the war will cost a total of $61.1 billion, but only $47.5 billion of that was counted in fiscal 1991.

At the same time, allied contributions totaling $48.2 billion are coming in during the current fiscal year. As of July 12, the Pentagon had received $39 billion in cash contributions, and another $9.2 billion is due before the end of the fiscal year.

The higher deficit figures for 1992 came despite the fact that the White House on Monday revised upward its economic forecast for the next six months.

In an official update of the Bush Administration’s forecast that was included in the budget review, the White House said it expects the recovery in the second half of the year to help buffer the impact of the first-half slump.

It predicted that the nation’s output of goods and services--the gross national product--will decline by just 0.2% in 1991. For 1992, the Administration said it expects the GNP to rise by 3.2%.

In addition to the bad news on next year’s deficit, the Administration also dramatically raised its estimates of the deficits for 1993 through 1996 and put much of the blame on “technical readjustments” on its estimates of future tax revenue.

The White House said the deficit in 1993 should decline, but only to $245.7 billion; as recently as February, the Administration predicted that the ’93 deficit would fall to $201.5 billion.

And in 1994, the White House acknowledged that the deficit will remain at the stubbornly high level of $132.1 billion; last winter, the government’s budget analysts predicted that it would fall to $61.8 billion.

Still, the White House insisted that the federal debt burden will gradually decline once the short-term problems of the S&L; crisis and the Persian Gulf are resolved.

The Administration predicted that the deposit insurance system would stop draining the budget after 1994.

But the White House acknowledged that there will continue to be small, long-term costs from the Persian Gulf War--costs such as long-term disability benefits for veterans--that will continue until at least 1996.