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Budget Reversal Leads to Deficits
Federal budget deficits are back. Last year, the Congressional Budget Office (CBO) projected a surplus of $313 billion for 2002 and $359 billion in 2003. The CBO now projects a deficit of $21 billion this year and $14 billion in 2003. According to the Associated Press, these new projections mark one of the steepest budgetary downslides ever. The budget surplus evaporated in the short term largely because of the recession, lowered tax revenue, and the war on terrorism that added billions to the defense budget. According to the new CBO projections, however, the large 10 year tax cut is the single biggest factor in reducing the surplus over the coming decade. The deficits are likely to make this year's budget session more contentious than ever. Senator Edward Kennedy (D-MA) recently called for delaying portions of tax cuts affecting upper income families to free up $350 billion for other priorities, including adding a prescription drug benefit to Medicare. President Bush and other Republicans, however, said a delay in a tax cut is nothing less than a tax increase. An analysis of Kennedy's proposal by the Center on Budget and Policy Priorities, however, indicates that nobody's taxes would increase. Under the new tax law, families with annual incomes of $1 million are scheduled to receive a tax cut of $7,133 in 2002. In 2006 under the new law, those million-dollar families are to receive a tax cut of $31,406. Kennedy's proposal would hold the tax cut to $8,954. Source: "Budget Surplus Plummets to Less than Half of Original Estimates," The Associated Press, January 23, 2002. "If the Math's a Bit Fuzzy, the Politics are Clear," Elisabeth Bumiller, The New York Times, January 21, 2002. For a related story see: "Without a Surplus How Do We Pay for Notch Reform," in the March 2002 issue of The Social Security & Medicare Advisor. March 2002 | ||||||||
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