WASHINGTON, July 11: The US budget deficit will be trimmed to an estimated $296 billion in the current fiscal year, down sharply from earlier projections, President George W Bush said on Tuesday.
Bush said surging tax revenues from economic growth would help reduce the deficit, compared with last year's White House projection of a $423-bn budget shortfall.
“The economic growth fuelled by tax relief has helped send our tax revenues soaring,” Bush said at the White House, noting that revenues are expected to increase 11 per cent, or $246 billion, in the current fiscal year.
“The increase in tax revenues is much better than we had projected, and it's helping us cut the budget deficit.” The deficit for the 2006 fiscal year to September 30 would be only marginally lower than the $318-billion gap in the prior fiscal year. But the projections had been higher due to increased spending, notably for the war in Iraq and the recovery from Hurricane Katrina.
In January, the non-partisan Congressional Budget Office forecast a US budget deficit of $337 billion for the fiscal year ending on September 30.
The latest projections would represent about 2.3 per cent of US gross domestic product, according to Bush, compared with 3.2 per cent of GDP under the last White House projection.
Bush and his allies have long argued that lower tax rates essentially pay for themselves by stimulating growth that results in higher revenues, although many economists disagree.
The US president said the latest numbers show he was right in arguing for tax cuts.
“And that's what's happening today. Thanks to economic growth and the rise in tax revenues, this year the deficit will shrink to 2.3 per cent of GDP. And that's about the same as the average over the past 40 years.” Bush argued, however, that additional efforts are needed to keep reducing the deficit and called on Congress to reduce “wasteful spending” and pass a “line-item veto” that would allow the president to eliminate portions of spending bills without killing the entire bill. —AFP