Congressman Pat Tiberi's Capitol Notebook

CONGRESSMAN PAT TIBERI'S CAPITOL NOTEBOOK

For the week of September 12, 2004

WASHINGTON-As you've probably heard by now, the federal deficit is expected to total about $422 billion when the fiscal year ends on September 30. That's bad news, right? Maybe, but maybe not.

Less than a year ago many "experts" were predicting that the deficit for fiscal 2004 would soar past $500 billion. Just last March, expectations were that the figure would top $475 billion. So while this year's red ink will be at a record high, it will be far less than projected even a few months ago.

In addition, that one raw figure doesn't tell the whole story. Taken another way, the deficit represents about 3.6% of the Gross Domestic Product, the value of all the goods and services we produce. That figure is well below the 6% peak reached in 1983. Many economists believe this is a far better measure of the deficit's economic impact.

What's more, the trend is in the right direction. Estimates are that the deficit will shrink to about $348 billion in fiscal 2005.

What's led to the decline in the deficit? A strengthening economy. The biggest factor in the deficit's decline this year is the surprising growth in tax revenue, which happened because individual and business income are stronger than they were expected to be, according to the Congressional Budget Office (CBO). CBO's estimates indicate the government will collect about $54 billion more in revenue this year than expected.

The tax relief policies put in place in 2001, 2002 and 2003 have helped our economy out of recession and played a role in this revenue increase. Without our tax policies, the economy would not have recovered as well as it has. More Americans would have lost their jobs without these well-timed policies. In addition, it is uncertain how much the drag of a weaker economy would have affected budget deficits.

The increased revenue coming into the Treasury combined with a slight, $2-billion reduction in spending compared with the March estimate, are the two biggest factors in the improved deficit picture.

Of course, critics would have you focus on just one number. I agree with them that at $422 billion, the deficit is unacceptable. But those same critics conveniently forget to explain how and why the deficit reached that level. They ignore the fact that the administration and Congress have had to respond to the events of 9-11, a war on terrorism, and to the economic slowdown and recession of 2000-01. All these things had costs and contributed to budget deficits. But the latest CBO figures show that we are getting this issue under control-just as we pledged to do.

Congressman Pat Tiberi represents Central Ohio in the U.S. House of Representatives. He can be reached in Washington at 202 225 5355