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Deficits and the Mid-Session Review

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On July 30, the Office of Management and Budget released new projections stating that the budget deficit will grow to $445 billion in fiscal year 2004. This is $70 billion larger than the 2003 deficit, which stood at $375 billion. Despite the economic recovery, the deficit has continued to rise significantly. 2004 will be the fourth consecutive year of fiscal deterioration, following eight consecutive years of fiscal improvement.

The $445 billion projected deficit also is more than $700 billion worse than what the Administration projected for fiscal year 2004 in its first budget, submitted in February 2001. At that time, the Administration forecast a $262 billion surplus for 2004.

In the face of this dramatic fiscal deterioration, the Administration is now attempting to downplay the deficits and is citing the new figures as evidence it is making progress on the fiscal front. In spinning the new deficit numbers, the Administration and others have made several dubious claims.