White House Acknowledges Larger Deficits

Times Staff Writer

WASHINGTON -- White House Budget Director Mitchell E. Daniels Jr. said in a speech Wednesday that the Bush administration expects to run deficits of 2% to 3% of the gross domestic product in the next few years, substantially more than the deficit the government ran in the last fiscal year.

In an address to the U.S. Chamber of Commerce, Daniels described the deficits as small compared with the shortfalls of the 1980s and early 1990s, when federal overspending reached as high as 6% of GDP.

Daniels portrayed the expected deficits as "manageable," not least because four-decade low interest rates will make it cheap for the government to borrow.

"We ought not [to] hyperventilate this issue," Daniels told his audience.

But Thomas Kahn, Democratic staff director for the House Budget Committee, told Associated Press that the outlook was worse than Daniels let on. "Their policies have wiped out the entire surplus, driven us into debt, and what is their solution? More tax cuts," he said.

North Dakota Sen. Kent Conrad, the top Democrat on the Senate Budget Committee, told Reuters, "We are headed for a train wreck of enormous proportion."

The budget director's acknowledgment that larger deficits are in the offing -- the first by a senior White House official this budget cycle -- suggests the problem that awaits President Bush as he seeks to win congressional approval for a new round of tax cuts and funds to prosecute the war on terrorism and possibly a war against Iraq.

Daniels did not give details of his deficit estimate, only describing the expected shortfalls as a percentage of the GDP. But with the nation's annual economic output now running about $10 trillion, his description suggests deficits of $200 billion to $300 billion per fiscal year. For the fiscal year that ended last September, Washington ran a $159-billion deficit.

Deficits of the size discussed by Daniels would approach the record $290-billion shortfall set in 1992 under the first President Bush.

Last week, when the current president unveiled his new $674-billion package designed to spur the economy, the administration signaled that it expected substantially higher deficits.

White House economists briefly posted on the White House Web site an analysis that showed the plan would add $33 billion to the deficit this fiscal year, $113 billion next fiscal year and $359 billion over the five years from 2003 to 2007. But they quickly removed the document, saying it needed to be reworked.

Daniels traced the administration's overspending to the "triple whammy" of a recession and stock bust that greeted Bush when he arrived in office and then the Sept. 11 attacks. In Bush's time in office, Washington has swung from running multi-hundred-billion-dollar surpluses to similar-sized deficits.

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