Bush Lowers ’92 Federal Deficit Forecast by $66 Billion : Economy: He blames the Democrat-controlled Congress for failing to pass Administration proposals. But lawmakers call report partisan politics.

The Bush Administration on Thursday predicted a federal deficit for 1992 of $333.5 billion--$66.2 billion less than the White House had forecast when it released its budget last winter, but only because Congress has not yet provided fresh funds for the massive S&L; bailout.

The White House also released a revised economic forecast that anticipates continued sluggish growth through the end of the year--thus offering little political solace to President Bush and his reelection campaign.

The White House predicted that annual growth would amount to a modest 2.7% for 1992, up from its earlier estimate of 2.2%. But the Administration also projected that the nation’s unemployment rate would average 7.3% for the year, a more pessimistic forecast than its January estimate of 6.9% and closer to the June jobless rate of 7.8%.

White House chief economic adviser Michael J. Boskin noted that the Administration’s new forecast is largely in line with recent predictions from both private economists and the Federal Reserve Board.

In a political attack on the Democratic leadership, White House Budget Director Richard G. Darman used the release of the budget and economic update as an opportunity to blame the nation’s prolonged economic downturn on the Democrat-controlled Congress’ refusal to pass the President’s economic initiatives.

Darman also attempted to counter mounting criticism of alleged White House paralysis on the economy by pointing to the repeated rejection by Congress of new funding for the Resolution Trust Corp., which handles the S&L; cleanup, as a symptom of a broader gridlock on Capitol Hill.

The refusal to approve new funds for the RTC has limited the agency’s ability to seize failing thrifts, a delay, Administration officials argue, that ultimately will add both to the costs of the bailout and the federal deficit.

“The good news is the deficit is down because Congress has failed to act,” Darman said. “The bad news is: The economy is not as far up and the deficit is not as far down as they should be because Congress has failed to act.”

Congressional Democrats responded by attacking the Administration’s mid-year budget revision, calling it a partisan political document that offered no new initiatives to help pull the nation from its economic doldrums.

“It’s become a presidential reelection manual, produced and printed at taxpayer expense,” complained Sen. Jim Sasser (D-Tenn.), chairman of the Senate Budget Committee.

“When the team that should be fixing the economy becomes a political hit-team fixing blame, it means the Bush Administration is more interested in halting the President’s decline in the polls than in helping America’s declining economy,” added House Majority Leader Richard A. Gephardt (D-Mo.).

“The country would be far better off if the Bush Administration spent its time trying to solve problems instead of trying to smash the Congress and their political opponents,” he said.

The budget and economic revisions come at a critical juncture in the presidential campaign, when the economy clearly has become Bush’s chief political liability.

Indeed, the economy’s weakness was underscored again Thursday, when the government reported that the number of Americans filing first-time claims for unemployment benefits rose sharply in early July. The Labor Department said that initial jobless claims for the week ending July 11 hit 422,000, up from 403,000 the week before--making it unlikely that the nation’s unemployment rate would show much improvement this month.

With Bush’s standing in the polls plummeting, the mid-year review offered the Administration a chance to provide a renewed argument for its economic policies--many of which lie stillborn in Congress--and to contrast them with the Democratic alternatives.

In preparing the budget revision, officials took the unusual step of reprinting 390 pages of Bush’s budget proposal from January, with commentary critical of Congress for failing to enact his proposals.

“Almost all of the initiatives that require congressional action are still pending,” the White House charged in the budget report.

And to demonstrate White House leadership on the economy, Darman indicated that the Administration soon will resume a legislative push for at least part of the President’s economic growth and tax package, which Congress rebuffed last spring.

“I think you would all agree that the economy is growing at too slow a pace, and we have got to do more to get it moving,” said Darman. “We believe these policies are in the best interest of the country and the health of the economy, so we’ve got a responsibility to try to advance them.”

But most Administration officials acknowledged that they have no new initiatives to add to the old proposals. And Darman and others conceded that Congress is unlikely to give the White House what it wants just as the presidential campaign is heating up.

Darman said that the White House still has not decided how hard to push for the more controversial aspects of the package, including Bush’s longstanding proposal to cut the capital gains tax.

Darman stressed, however, that the Administration would oppose any legislation that includes a tax increase on the rich--a plan that may be proposed by leading congressional Democrats. Other Administration officials added that the White House has no intention of pushing for a politically popular tax cut for the middle class, either.

In its budget revision, the White House estimated that a $69.1-billion drop in spending on deposit insurance for the S&L; bailout would far outweigh a slight $2.1-billion drop in tax revenues and thus result in a substantial decline in the deficit for fiscal 1992, which ends in September. In its initial budget, released last February, the White House had estimated that the deficit would hit an all-time record of $399.7 billion.

But Darman wrote in the budget revision that the delay in paying for failed thrifts will largely move “the necessary outlays to subsequent years.”

The White House also reduced its earlier projections for the deficit in fiscal 1993, which begins in October, to $341 billion, an $8.9-billion drop from the February estimate of $349.9 billion. That drop also is expected to result from a decrease in spending on deposit insurance for thrifts.