-- July 15, 2003
The Bush administration today revised upward its estimate for the federal deficit. Their new estimate: A whopping $455 billion this year -- nearly $150 billion more than their previous estimate for the year.
It's no surprise to us that the previous estimate of $304 billion, given back in February, didn't hold. In fact, we expect deficit estimates to keep ballooning. That's because the administration is still betting on a big recovery in the economy when any recovery will likely be mild and short-lived.
After all, gross domestic product growth is a measly 1.4%. Even today's retail sales number, while positive news, shows that sales are still only increasing because of fire sales and big incentives -- and even in the auto sector, those incentives are losing their impact. Plus, rising mortgage rates could put a damper on spending. And business spending, despite rock-bottom lending rates, hasn't picked up much momentum, if any.
To soften the blow of their announcement, the administration pledged to cut the deficit in half over the next few years -- but isn't saying how it plans to do that. Don't hold your breath! We expect the deficit to spin out of control and put even more pressure on any attempts at economic recovery.
related article: $455 Billion Budget Shortfall Seen