The OMB (the White House agency with responsibility for the budget) pegged the upcoming budget deficit at $300b–this is basically a direct projection based on the fact that the deficit for the first four months of fiscal year 2003 was $98b (so 12 months should be just under $300b). This of course does not include any expenditures for the war, nor for any post-war nation-building in Iraq. The White House has, somewhat famously, refused to attach a number to the cost of war. Here’s Ari Fleischer in late February on the topic:
“There is unquestionably a responsibility on the Executive Branch to provide to the Legislative Branch an estimate about what the war would cost, what the humanitarian operation would cost. And that is a responsibility the administration takes seriously…Because we take it seriously, I’m not in a position to speculate what the number may be.”
Recently, CNN and othersreported that the White House would make a $95b supplemental request to cover the war. In any event, CNN now has an interesting piece on various estimates of the likely costs of the war.
So that puts this year’s deficit at at least $400b (and there are more tax cuts to come soon). As a percentage of GDP, $400 billion will approach 4%, levels only seen in 83-86 and 91-92, neither being great stretches for the U.S. economy. Indeed, the 91-92 recession bears much of the blame (credit?) for the elder Bush’s loss to Clinton in 1992.
P.S. The CNN story also has a great graph on “Budget Deficits as a Percentage of GDP”, but note that the projections do not include the cost of the war or any rebuilding of Iraq.
UPDATE: See also this editorial in today’s Washington Post, which ends with “To approve a budget plan including large tax cuts without attempting even to estimate the cost of the war would be breathtakingly irresponsible.” I’m not sure why they wrote “would be” instead of “is”.