OMB Predicts $445 Billion Federal Budget Deficit for Fiscal Year 2004, Rise in Medicare Spending Over Five Years

The federal budget deficit for fiscal year 2004 will be about $445 billion, including increased projections for Medicare spending, according to an Office of Management and Budget report released Friday, the Washington Post reports. The projected budget deficit is the "highest ever," but remains less than previous White House estimates of $521 billion, according to the Post (Milbank, Washington Post, 7/31). White House officials reduced their earlier estimate because of an unexpected increase in revenue, which was "partly offset" by an unexpected $6 billion increase in spending that was "largely for Medicaid and Medicare," the AP/Raleigh News & Observer reports. The report also increased Medicare spending by $67 billion over the next five years, with $26 billion of the increase reflecting costs not included in President Bush's budget proposal released in February (Fram, AP/Raleigh News & Observer, 7/31).

Although the White House's spending predictions did not go beyond five years, the Committee for a Responsible Federal Budget said "the problems only get worse" over the long-term as more baby boomers start to retire later this decade and become eligible for Medicare (Washington Post, 7/31). OMB Director Joshua Bolten said the estimated deficit, which would equal 3.8% of the overall economy, was "unwelcome" (Toedtman, Long Island Newsday, 7/31). "The good news is that [the deficit] is much lower than we projected, and we or any of the other forecasters projected just six months ago, and we believe that ... the trend will continue," Bolten said. Sen. Kent Conrad (N.D.), ranking Democrat on the Senate Budget Committee, said Bolten's optimistic economic analysis was "a remarkable claim." Conrad said, "It's a little like the captain of the Titanic saying there's good news as the ship goes down, because it's not sinking as fast as he'd said it would" (Washington Post, 7/31).