Bush’s parting gift to next president is record $490bn budget deficit

THE next US president will inherit a record budget deficit approaching $490 billion, according to a new Bush administration estimate.

The official said the deficit was being driven to an all-time high by the sagging economy and the stimulus payments being made to 130 million households in an effort to keep the country from falling into a deep recession.

A deficit approaching $490bn would easily surpass the record deficit of $413bn set in 2004.

An administration official revealed the $490bn figure yesterday on condition of anonymity because the new estimate had not been formally released.

Administration officials were scheduled to do that at a news conference late last night.

The new figure actually underestimates the deficit, since it leaves out about $80bn in war costs. In a break from tradition — and in violation of new mandates from congress — the White House did not include its full estimate of war costs.

White House press secretary Dana Perino had no comment on the $490bn figure. But she told reporters that the White House and lawmakers acknowledged months ago that they were going to increase the deficit by approving a short-term boost for the slumping economy.

“Both parties recognised that the deficit would increase, and that was going to be the price that we pay,” Perino said.

In fact, the White House had included cost estimates for an economic stimulus bill in its earlier projections, so the new figures represent a considerable deterioration in the government’s fiscal health.

The White House had predicted in February that next year’s deficit at $407bn, which means the increase in the projections since then would approach $80bn or so. Figures for the 2008 budget year ending September 30 may also set a record.

The numbers represent about 3% of the size of the economy, which is the deficit measure seen as most relevant by economists. That’s considerably smaller than the deficits of the 1980s and early 1990s, when congress and earlier administrations cobbled together politically painful deficit-reduction packages.

Still, the new figures are so eye-popping in dollar terms that it may restrain the appetite of the next president to add to it with expensive spending programs or new tax cuts.

In fact, pressure may build to allow some tax cuts enacted in 2001 and 2003 to expire as scheduled at the end of 2010, with congress also feeling pressure to curb spending growth.