About a month after the White House released its highly misleading and overly optimistic budget projections, the Congressional Budget Office (CBO) released their projections today. The CBO report projects a $331 billion deficit for FY05, a $33 billion reduction since they released an initial estimate earlier this year in March. CBO also has increased their estimate of the total deficits over the next ten years by more than $1.1 trillion to $2.1 trillion. These estimates are much more worrisome than OMB projections released last month as CBO and OMB differ over the ten-year deficits from 2006 - 2015 by more than $600 billion. Unlike the OMB numbers, CBO finds very little reason to be optimistic about the future health of the federal government. They write, "Although the deficit for 2005 is lower than previously expected, the fiscal outlook for the coming decade remains about the same as what CBO described in March." In March, CBO described a very dark future if current policies are continued. This CBO report casts further doubt on administration claims that their economic policies are working to spur strong economic growth and will continue to shrink deficits. CBO has confirmed what many private analysts have reported - that the recent jump in federal revenues are due to short-term and temporary factors that are unsustainable and that over the long-term, the country still faces many large and difficult fiscal challenges. CBO concludes, "Over the long-term, then, growing resource demands...will exert pressure on the budget that economic growth alone will not eliminate." Most strikingly, the CBO report states that if the tax cuts from the administration's first term are extended (with the exception of policies related to the alternative minimum tax), as President Bush has been strongly advocating, deficits over the next decade would increase $1.6 trillion on top of their current projections. The Senate Budget Committee's most senior Democrat Kent Conrad (D-ND) believes the nation needs a "serious fiscal wake-up call" if we are to correct the long-term budget shortfalls that "threaten our economic security." It's time for President Bush to be straight-forward with the American people and begin an honest conversation about adopting alternative policies that will return the country to a sound and sustainable fiscal foundation.

The Office of Management and Budget (OMB) released its mid-year budget review on July 13 and trumpeted the lower than expected deficit projections for 2005. The self-congratulatory rhetoric coming out of the White House since has overshadowed true problems down the road. While OMB has lowered its deficit projections for 2005 from $412 billion to $333 billion and continued to claim President Bush is well on his way to cutting the deficit in half by 2009, they continue to omit crucial aspects from their budget analysis and downplay more pressing budgetary concerns beyond 2009. First, the recently released projections to not include a fix to the Alternative Minimum Tax (AMT) after 2005. Many analysts are crediting the expanding reach of the AMT as one of the reasons individual and corporate tax receipts increased so unexpectedly over the last six months. It is widely accepted that Congress will take action soon to restrict the number of Americans who pay the AMT. This will have a profound impact on tax receipts, causing them to fall and in turn increase deficits. For OMB to omit this aspect is misleading and irresponsible. Secondly, as they have done repeatedly, OMB ignores the impact of current policies after the five-year window ending in 2009. According to the White House's own budget calculations released in the president's FY06 budget, if current policies are extended, deficits will begin to climb again after 2009. If these policies continue until the retirement of the baby-boomer generation about a decade later, deficits will skyrocket, reaching double digits as a percentage of GDP. Finally, the mid-year review does not reflect changes to tax policy scheduled to be debated and enacted this fall. Congress agreed to a budget resolution earlier this year calling for $106 billion in additional unpaid-for tax cuts to be passed by year's end. This alone will wipe out the $94 billlion improvement in the deficit OMB is forecasting. Until the White House, and to a certain extent Congress, begin to be more honest and forthright about budget projections and the future effects of changes in tax policy (beyond artificial five- or ten-year windows), budget policy in the U.S. will continue down a dangerous path.

The Treasury Department has told Democratic senator Max Baucus (D-MT) that the $8.184 trillion ceiling on government borrowing will not need to be raised this year, confirming speculation that the improvement in tax receipts seen in 2005 will allow Congress to avoid the politically charged issue for the first year since 2001. Despite this seemingly good news, Baucus called attention to the continually disturbing broader financial picture, noting that the debt limit has been raised four times and over $3 billion since 2002. "In the face of record deficits, the government needs to show more fiscal discipline," Baucus said in a news release. Taxing Internet Porn Speaking of tax receipts, Senator Blanche Lincoln (D-AR) and eight other democratic senators have introduced the Internet Safety and Child Protection Act of 2005 (S.1507), which would impose a 25 percent tax on "Internet pornography transactions." The revenues would be dedicated to a fund to support law enforcers and organizations that combat Internet and pornography-related crimes against children. News Coverage: Arkansas News Bureau Washington Post