WASHINGTON, Jan 25 (AFP) - The US government deficit would ease to 368 billion dollars in the current fiscal year under existing laws, but the real gap may be higher when costs for Iraq are added, the Congressional Budget Office said Tuesday.
The deficit would be slightly lower than the record 412 billion dollar shortfall in the 2004 fiscal year that ended last September 30.
But the estimate is up 20 billion dollars from the CBO`s September forecast of a 348 billion dollar deficit.
Moreover, the nonpartisan CBO said that its estimates "omit a significant amount of spending that will occur this year -- and conceivably for some time in the future -- for US military operations in Iraq and Afghanistan and for other efforts in the war on terrorism."
CBO noted that the law governing its projections requires its estimates to be based solely on spending and revenue measures already on the books.
Under these baseline estimates, the deficit would ease to 295 billion dollars in fiscal 2006 and 261 billion in fiscal 2007.
As a percentage of US gross domestic product, the deficit would fall to 3.0 percent in 2005 and 2.3 percent in fiscal 2006, CBO said.
The budget agency acknowledged that there would likely be costs not yet authorized by Congress, making the real deficit significantly higher.
"Additional appropriations (for Iraq, Afghanistan and the war on terror) are expected to add about 30 billion dollars to the deficit this year and possibly more next year," CBO said in its report.
"Thus, the 2005 deficit is likely to total around 400 billion dollars and the 2006 deficit well over 300 billion. With that extra spending included, the deficit in 2005 would amount to about 3.3 percent of gross domestic product (GDP) -- compared with last year`s deficit of 3.6 percent of GDP."
The White House later Tuesday was expected to detail a request for some 80 billion dollars in additional funds for military operations in Iraq and Afghanistan. Bush is scheduled to send his proposed fiscal 2006 budget to Congress early next month.
The CBO`s long-range outlook, which goes through fiscal 2015, projects the US government will remain in the red until fiscal 2012.
The cumulative deficits would be 1.188 trillion dollars in the 2006-2010 period and 855 billion dollars in the 2006-2015 period, CBO estimated.
The long-range outlook meanwhile is based on the expiration of the existing tax cuts engineered by President George W. Bush. It also makes no provision for Bush`s plan to overhaul the social security retirement system with private accounts.
John Lonksi, economist at Moody`s Investors Service said the report had little immediate impact on financial markets because "it`s nearly impossible to predict with any accuracy what the budget deficit`s going to look like 10 years from now."
Asked about the projected return to surplus in 2012, Lonksi said, "I wouldn`t count on it," adding that this would mean "drastic measures" including unpopular spending cuts.
01/25/2005 17:09 GMT - AFP