Forecast Shows Budget Deficit Drops Further

Continuing a yearlong trend of falling deficit forecasts, the Congressional Budget Office said Friday that it expects a fiscal 1997 federal shortfall of about $23 billion, $11 billion smaller than it estimated just a month ago.

Final figures for fiscal 1997, which ended Sept. 30, should be available late this month. But for now, the new estimate is the latest unexpectedly favorable twist in a year that began with the Clinton administration and the nonpartisan CBO projecting shortfalls of about $125 billion.

The latest, lower figure can only intensify the jockeying among members of Congress over budget surpluses that may emerge in a few years. In recent weeks, leaders and rank-and-file lawmakers have unveiled proposals to use the money for cutting taxes again, building highways and reducing the accumulated federal debt.

While the biggest reason for this year’s shrinking estimates has been unexpectedly high revenue collections, CBO reduced its projection this month almost entirely because a wide range of federal programs seem to be spending less than anticipated. These include Medicare, Medicaid, family support programs, the Postal Service and the Pentagon.

“It’s a lot of little different things,” said James Blum, CBO’s deputy director.

The reductions seem to have little to do with the budget deal President Clinton and Congress enacted in August that was aimed at eliminating federal deficits by 2002. The spending cuts in that measure, and most of the tax changes, do not take effect until 1998.

The new CBO report, based on Treasury Department figures, said the 1997 deficit would be “about $23 billion, plus or minus $2 billion.” A $23-billion deficit would be the smallest since the $6-billion shortfall of 1974.