WASHINGTON (Thomson Financial) - The White House cut Wednesday its forecast of the federal budget deficit for the fiscal year ending September to 205 billion US dollars, saying an expanding economy will boost tax revenues.
This means the deficit in this fiscal year is now expected to be 43 billion dollars or 18 percent smaller than last year's.
"This projected deficit is 1.5 percent of gross domestic product, well below the 40-year average of 2.4 percent," the White House said in a written statement.
"America's economy keeps growing, government revenues keep going up, the budget deficit keeps going down -- and we've done it all without raising your taxes," President George W Bush said after his budget office released the figures.
"It's good news, but there's more work to be done. A shrinking deficit is good. No deficit is better."
The White House repeated that its goal was to balance the budget by 2012, and said this goal would be achieved if current spending programs were followed. But Bush's term ends in January 2009.
"The federal deficit is declining for the third year in a row, and the president's goal to balance the budget by 2012 is achievable under the president's proposals, which would lead to a budget surplus in 2012 of 33 billion dollars," the White House said.
In the first eight months of the fiscal year the government had a deficit of 148.5 billion dollars, compared to 227 billion in the corresponding period of the last fiscal year, according to US Treasury figures.
Critics of the administration said Bush had squandered the budget surplus he inherited in 2001 by implementing lavish tax cuts for the wealthy. Bush has said the tax cuts have stimulated the economy and that most of the new spending has been for his global war on terror.
"Nothing in the administration's deficit announcement changes the failed fiscal record of President Bush," said Senate budget committee chairman Kent Conrad, a Democrat.
"He has increased spending by nearly 50 percent since taking office, while at the same time repeatedly cutting taxes primarily on the wealthiest," he said.
"The result has been that the 5.6 trillion-dollar projected surplus he inherited has been wiped out. And debt has exploded on his watch -- rising from 5.8 trillion dollars in 2001 to approximately nine trillion by the end of this year."
But Republican Senator Judd Gregg said the latest budget report "is further proof that the current tax system is working."
He added: "Unfortunately, this economic boon for American families and small businesses may soon come to an end, following the passage of a Democratic budget that contains the largest tax hike in the nation's history."
James Horney of the Center on Budget and Policy Priorities, a budget watchdog group, said: "There is overwhelming evidence that the administration's claim that the tax cuts are producing unusually strong economic growth is not accurate."
He added: "Without the president's tax cuts, which will cost 300 billion dollars in 2007 alone, the federal government would be running a nearly 100 billion-dollar surplus this year instead of the 205 billion-dollar deficit that the administration estimates."
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