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Tight Federal Budget Projected Future Surpluses Leave Little Room For More Spending

By Glenn Kessler

The White House on Wednesday released an extraordinarily tight budget forecast for the rest of President Bush’s term, suggesting there is little room for additional spending on defense, a prescription drug benefit, Social Security reform and other high-profile initiatives without cutting into other programs.

For the fiscal year that ends Sept. 30, the administration projected a budget surplus of $158 billion, but only $1 billion remained after the surplus generated by Social Security payroll taxes is excluded. The administration estimated another slim $1 billion non-Social Security surplus in 2002, $2 billion in 2003 and $6 billion in 2004.

Those numbers stand in sharp contrast to huge surplus projections that have dominated the political landscape in recent years, and Democrats on Wednesday were quick to pounce on the new forecast. “This is fiscal mismanagement big time,” said Senate Budget Committee Chairman Kent Conrad, D-N.D.

The sharp plunge in the non-Social Security part of the forecast -- largely the result of Bush’s tax cut and the slowing economy -- will loom as a major obstacle to important goals of lawmakers in both parties. Bush, and leading Democrats and Republicans, have sworn not to use the Social Security payroll taxes for other government programs, though that had been common practice until the big surpluses of recent years ago.

Administration officials emphasized the overall surplus numbers, noting that this year’s surplus will be the second largest in history.

“The nation is awash in money, and it’s going to be,” said budget director Mitchell E. Daniels Jr. Over the next decade, he said, the Social Security surpluses will help reduce the national debt held by the public, now $3.3 trillion, to the smallest share of the economy since 1917.

While Democrats said Bush’s tax plan is to blame for the new fiscal situation, the administration and its GOP allies said that runaway spending poses the greatest threat to the surplus. White House spokesman Ari Fleischer said the new forecast was “a warning signal because there are still people in Congress who want to spend more money and bust the budget.”