Addendum on the Deficit

As AB mentions below, the final tally of 2003’s budget deficit was $374 billion. Yes, that’s a lot, and yes, it’s a record deficit by far. The next closest deficit in US history was $292 billion, under Bush 41. However, it is lower than the White House’s mid-year estimate of $455 billion, and that’s the emphasis that the Bushies are certainly hoping for in the media.

Why was the deficit smaller than predicted 4 months ago? If you look at the breakdown, it turns out that the biggest single reason is because when they made the mid-year estimate, the White House was expecting spending on Iraq and Afghanistan to be higher than it actually was. Put another way, it looks like the White House was banking on part of their $87 billion request to be approved in 2003. Instead, of course, all of the $87 billion will be spent in 2004. That means that, while the deficit was lower than predicted this year, it will be higher than predicted next year. So don’t get carried away with thoughts of fiscal happiness at the “lower than expected” reports that you’ll read about.

By the way, given that the predicted deficit for next year was $475 billion, it looks pretty safe to guess that 2004’s deficit will pass $500 billion, as White House Budget Director Josh Bolten discreetly mentioned today. And don’t look for it to get a lot better in 2005.