WASHINGTON, Jan 25 (AFP) - The US budget deficit is likely to hit a record 427 billion dollars in fiscal 2005, going deeper into the red as a result of a special funding request for Iraq and the war on terrorism, the White House said Tuesday.
The new deficit estimate was disclosed by senior Bush administration officials as they detailed their special 80-billion-dollar request for operations in Iraq, Afghanistan and elsewhere as part of the global war on terror.
If accurate, the deficit would eclipse the 412-billion-dollar deficit in the 2004 fiscal year. But as a percentage of gross domestic product (GDP) the deficit would be 3.5 percent, down slightly from 3.6 percent in fiscal 2004.
The estimated shortfall for the fiscal year to September 30 came the same day the Congressional Budget Office projected a deficit of 368 billion dollars.
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.
The nonpartisan CBO said however 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."
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 deficit estimate 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 19:46 GMT - AFP